UNDERSTANDING
SECTION 179
Essentially, Section 179 works like this:
When a business buys certain items of equipment, like a copier -or- printer(s) it typically gets to write
them off during a (5) year depreciation period.
In other words, if your business prospect/customer spends $50,000 on a new machine, it gets to write off
(say) $10,000 a year 20% for (5) years (these numbers are only meant to give you an example.)
Now, while it's true that this is better than no write off at all, most business owners would really prefer to
write off the entire equipment purchase price for the year they buy it.
In fact, if a business could write off the entire amount, they might add more equipment this year instead of
waiting. That's the whole purpose behind Section 179… to motivate the American economy (and your
business prospects) to move in a positive direction – buying a new MFP or new laser printer from you.
For most small businesses SMB (adding total equipment and software totaling less than $500,000 in
2011), the entire cost can be written-off on the 2011 tax return.
For large businesses adding even more than $500,000, the write-offs are just as substantial. See the
following calculation example of the savings that is currently available to your business
prospects/customers after the 'Tax Relief Act of 2010' passed in December 2010.
Savings Example:
New Toshiba MFP & MPS Printers
$ 650,000
1st Year Write Off:
(Section 179 rules, $ 500,000 is maximum write off for 2011)
$ 500,000
+ Bonus 1st Year Depreciation:
(Section 179 rules, remaining value: $ 650K - $ 500K =$ 150K x 100% = $150K)
$ 150,000
Normal 1st Year Depreciation:
(20% depreciation in each 5 years)
$
Total 1st Year Tax Deduction:
$ 650,000
Tax Savings:
(assume 35% business tax rate $ 650K x 35% = $ 227,500)
$ 227,500
Total New Equipment Cost:
($650K less all tax deductions of $227,500 for Section 179 rules)
$ 422,500
0
Limits of Section 179
Section 179 does come with limits - there are caps to the total amount written off ($500,000 in 2011), and
limits to the total amount of the equipment purchased ($2,000,000 in 2011.)
The deduction begins to phase out dollar-for-dollar after $2 million is spent by a given business, so this
makes it a true small and medium-sized business deduction.
After the recent passage of the 'Tax Relief Act of 2010', large businesses that exceed the $2 million in
capital expenditure threshold can take a bonus depreciation of 100% on the amount that exceeds the
limit. And then also take normal depreciation on the rest (and that'll be zero in 2011). Nice.
Note> "Bonus Depreciation" didn't make it into the 'HIRE Act of 2010' but did make it in the 'Jobs Act of
2010' extending "50% Bonus Depreciation" for the 2010 tax year; then it was increased to "100% Bonus
Depreciation" by the 'Tax Relief Act of 2010' thru 12/31/2011.
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease less than $2 million in new or used business
equipment during tax year 2011.
If a business is unprofitable in 2011, and has no taxable income to use the deduction, that business can
elect to use 100% Bonus Depreciation and carry-forward to a year when the business is profitable.
Section 179 Qualifying Property
Section 179 was designed with businesses in mind.
All businesses need equipment on an ongoing basis, be it machinery, computers, software, office
furniture, vehicles, or other tangible goods. It's very likely that your business has purchased many of
these goods during the past year, and will do so again and again. Section 179 is designed to make
purchasing that equipment during this calendar year financially attractive
Material goods that generally qualify for the Section 179 Deduction
Please keep in mind that to qualify for the Section 179 Deduction, the below equipment must be
purchased and put into use between January 1, 2011 and December 31, 2011.


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Office Equipment (i.e.: copier, fax multifunction products, laser printers)
Computers – Toshiba Thrive Tablets
Computer Software (i.e.: ReRite®, Drivve®, PaperCut® , PREO®,)
Act Now
Section 179 can change yearly without notice, so it benefits you to take advantage of this generous tax
code while it's available. Section 179 offers small businesses a great opportunity to maximize their
purchasing power. In addition, the recent Stimulus Acts have provided the small business owner with
generous new (and higher) deduction limits. Most of the equipment your business will purchase, finance
or lease qualifies for the deduction.
Leasing and Section 179
Did you know that your company can lease equipment and still take full advantage of the Section 179
deduction? In fact, leasing equipment and/or software with the Section 179 deduction in mind is a
preferred financial strategy for many businesses, as it can significantly help with not only cash flow, but
with profits as well.
Non-Tax | Capital Lease
The main benefit of a non-tax capital lease is that you can still take full advantage of the Section 179
Deduction, yet make smaller payments.
With a non-tax capital lease you can acquire and write off up to $500,000 worth of equipment this year,
without actually spending $500,000 this year. A small business that is managing cash flow can
leverage a non-tax capital lease and still take the Section 179 Deduction.
Examples of non-tax capital leases include a '$1 Buyout Lease' and a '10% Purchase Upon Termination
(PUT) Lease'. In many cases, the amount you business customer save in taxes will be MORE than the
total of their first year's payments.
Equipment Financing
Customers may also obtain an equipment loan using an Equipment Finance Agreement (EFA) and still
take the Section 179 Deduction.
Advantages of Leasing and Financing
The obvious advantage to leasing or financing equipment and then taking the Section 179 Deduction is
the fact that your customer can deduct the full amount of the equipment, without paying the full amount
this year. The amount you save in taxes can actually exceed the payments, (you are reading this
correctly - in many cases, the deduction will actually be profit.)
Electing the Section 179 Deduction | Form 4562
If your customer is a small or medium-sized business owner who has purchased or leased equipment in
2011 and placed it into service during the calendar year, then all they need to do is elect to take the
Section 179 Deduction to ensure that their business captures the available tax savings (it is not
automatic - you must elect to take it.)
Fortunately, electing to take the 179 Deduction is very easy:
When to take the Section 179 Deduction
Your business customer can elect to take the deduction when they file their tax return for the year,
whether they are filing on time –or- received an extension.
How to take the Section 179 Deduction
To elect to take the Section 179 Deduction, simply fill out Part 1 of IRS form 4562, available for free
below, and attach it to your tax return (much like any other additional form, such as a "Schedule C" or
similar.)
http://www.irs.gov/pub/irs-pdf/i4562.pdf
Download IRS form 4562
If your customer does not feel comfortable filling out the form themselves, their tax preparer can easily
take care of IRS form 4562.
Their tax preparer may also be able to advise you of additional Section 179 Deduction and Bonus
Depreciation savings that may be available to them.
As mentioned previously, most business equipment, as well as off-the-shelf software that your business
customer purchases –or- leases for business-use is going to qualify for the Section 179 Deduction.
Is there anything else I should know?
The Section 179 is taken on an item by item basis, and you do not have to use it on all eligible property
bought during the year if you do not wish to do so.
Heads Up…
Your customer needs to keep complete records of the business equipment they leased or purchased
during 2011, including where they acquired the equipment from and the date the equipment was acquired
and placed into service – this another way a dealer can develop a deeper relationship with their customer.
With aggressive TFS lease promotion rates, cash incentives for copier this financial savings strategy is
another way of creating more incremental business for our dealers.
I hope this information and overview is helpful for you and your selling efforts of new Toshiba products
offerings (MFP, MPS Printers and Software) to your business customers.
Sincerely,
Jon Arvik
Jon Arvik
National Business Development Manager
Toshiba America Business Solutions
Research Triangle Park, NC
jon.arvik@tabs.toshiba.com
(919) 641-0692