Published December 2, 2016 | Updated January 29, 2020
Waiting for an opportunity to save on equipment your business could use now? With Section 179, you can make your own equipment savings opportunity anytime you want. But in a recent survey, more than 7 out of 10 businessowners didn’t understand the financial impact of Section 179 on the affordability of commercial equipment.
Well, let’s fix that. First, what is Section 179 and what can it do for your business? In a nutshell, Section 179 allows you to get an effective discount equal to your tax rate on all qualifying equipment up to the deduction limit, currently $1,040,000. It allows businesses (subject to specific limitations) to deduct the full cost of equipment upfront, rather than depreciate it over a number of years.
What kinds of equipment qualify? Just about anything, including computers, vehicles, manufacturing equipment, farm machinery, office furniture, and much more.
So let’s get to the financial impact. Here’s a simple example based on a common tax situation:
- Purchase Price: $50,000
- Total First Year Deduction: $50,000
- Tax Savings on Purchase (based on a typical 21% rate): $10,500
- Effective Cost of Equipment: $39,500
To qualify for Section 179, assets must be purchased and put into service by December 31st of that tax year. Both new and used equipment can qualify, and you can even deduct the cost of qualifying software. Talk to your tax professional for details and be sure to ask about using Section 179 in combination with bonus depreciation if your equipment needs exceed $1,040,000 for the year.
By working closely with your tax advisor and an experienced finance company, you might be able to put more or better revenue-producing equipment into service. You can stop running equipment “until the wheels fall off.” You can bid on that new project more effectively and grow your business faster.
At LEAF, we work with customers every day to maximize their equipment purchasing power – putting more revenue-producing equipment into service – with a simple, fast process and customizable terms that give you more control of budgets and cash flow. If you’d like to discuss how to leverage Section 179 to fuel your growth, give us a call.