The end of the 4th quarter 2017 is here. The taxman is waiting in January. Start thinking about what you are buying fast and take advantage of the tax savings available to you.
Most everyone knows about the accelerated depreciation tax savings on new equipment the past few years, but used equipment can provide tax benefits too. Since the passage of the American Taxpayer Relief Act of 2012, used equipment qualifies too. The emphasis of this deduction is to get businesses buying equipment and investing in their companies to help jump-start and keep the economy rolling.
According to www.section179.org, which basically simplifies the Section 179 of the IRS Tax Code, limits on used equipment have been raised to $500,000, same as new equipment, for the first year. New equipment does receive an additional 50 percent of the remaining balance, but each has a maximum of $2,000,000 before being reduced. What does that all mean? Here’s an example:
- New or used equipment purchase $750,000
- 1st year accelerated depreciation write-off $500,000
- Bonus depreciation (for new equipment only) $125,000
- Write off for 1st year for new equipment $625,000
- Write off for 1st year for used equipment $500,000
While used equipment write off is not as much as new, a typical write off would be $100,000, so this is five times the normal amount. This means, even on a used piece of equipment, you will pay a whopping $144,000 less in corporate taxes, which means that a $500,000 machine really only costs you $356,000 — a great investment in your business and your country.
This deduction is not just for portable equipment. Stationary equipment qualifies also, up to and including the installation costs. This can be a major cost savings for companies switching from diesel to electric equipment.
So what equipment qualifies?
- Some vehicles
- Computers, office equipment and furniture and much more
What about used equipment?
Section 179 considers used equipment too. To qualify, the equipment must:
- Basically meet the same new equipment requirements
- Must be new to the business
When considering used equipment, make sure to meet these qualifications if at all possible. You are also able to carry over these credits. This means, next year you will have any additional credit from 2017 to apply to 2018. With the proposed new Tax Code changes, who knows if this will continue in the future? On another note, also included in the capital purchase list is software. So for those that are looking into trucking or recycling software, or in need of scale software, take advantage now. Even some leases qualify. Look to www.section179.org for more information and save without even purchasing any equipment.
I’m a Grinder Guy, not an accountant, so check with your accountant. Don’t just take my word for it. Your accountant will have more accurate, additional and up to date information. But I can tell you this for sure, the Grinder Guy will be driving another new truck by the end of December!
For more information on any Section 179 qualified financing, call me and I can assist you with getting financed and any additional help with Section 179 information you are looking for or just take a look at www.section179.org for yourself and contact your accountant or finance company afterward.
Good Luck, let’s upgrade the fleet and keep grinding!
Questions? Dave Whitelaw, The GrinderGuy email@example.com