As you get your end-of-year equipment receipts in order for tax time, it makes sense to go ahead with that software or hardware upgrade now—by midnight tomorrow, December 31, to be exact. Thanks to new Section 179 deduction limits approved through the Jobs Act of 2010, you can give your one-man shop or larger facility new gear or software by the end of the year and write-off up to $500,000 of its cost on your taxes next April.

Section 179 has been around since 1981 and the Economic Recovery Tax Act (ERTA) and is likely a standard deduction for most of you by now. Back then, the maximum deduction was $10,000. What’s changed this year are the deduction limits, which are good on new and used equipment, including off-the-shelf software. You can now deduct up to $500,000 worth of software and equipment purchased in 2011, up from $250,000 in 2010, and the deduction doesn’t begin to phase out until your facility spends more than $2 million, up from $800,000 in 2010. A special “bonus” depreciation, passed in the Tax Relief Act of 2010, applies to purchases after the $500,000 limit is reached and applies only to new equipment. Larger facilities that exceed $2 million in equipment purchases can also take advantage of the bonus depreciation.

A site devoted to Section 179 has a sample calculation of what those savings might look like here, as well as what kinds of equipment qualify here. Your HVAC systems don’t qualify, for example, but most software, computers and storage setups do. Modified, custom software gets into a tricky zone, so best to ask a professional about exactly what you can deduct.

For more information on how to elect the Section 179 Deduction come tax time, visit the IRS’s site here or ask your accountant when you see her or him next spring.

(Hat tip to Toolfarm’s Michele Yamazaki, who highlighted how Section 179 applies to software purchases on her site’s blog.)