SECTION 179 - How Much Could You Save?
Leasing your Embroidery Machine through CAMFive EMB and Sunset Financial Group provides your company the ability to take advantage of the IRS’s Section 179 Deduction, which allows your business to deduct the full purchase price of equipment, up to $1'000,000, as long as it was placed it service within the calendar year. In fact, a company’s actual dollar tax savings from Section 179 could potentially exceed the payments made in the purchasing year.
FIRST TAX YEAR SAVINGS
21% Section 179 vs 4% Set Depreciation Schedule
Expiring Soon – IRS Section 179 Tax Benefit for Office Equipment
Businesses have significant reasons to acquire and install capital equipment before the end of this year, thanks to Section 179 of the Tax Code. For the current tax year, Section 179 has been dramatically increased to $1'000,000 in 2019!Things to know:
- 2019 Deduction Limit = $1'000,000
This deduction is good on new and used equipment, as well as off-the-shelf software. This limit is only good for 2010, and the equipment must be financed/purchased and put into service by the end of the day, 12/31/2019.
- 2019 Spending Cap on equipment purchases = $2,500,000
This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive.”
- Bonus Depreciation: 100% for 2019
Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. Note: Bonus Depreciation is available for new equipment only.
This can have a DRAMATIC effect on tax savings and, in essence, DRASTICALLY reduce the overall cost of equipment purchases while buying equipment and all end-of-year vendor incentives that likely exist still apply as well.
Here’s a summary of the changes to Section 179 for 2019:
What equipment qualifies for Section 179?
Generally speaking, almost every piece of equipment used for business purposes can be deducted under Section 179, including:
Machinery and equipment
Tangible personal property used for business
Business vehicles with a gross vehicle weight over 6,000 lbs
Business vehicles under 6,000 lbs limited to $11,160
Digital cinema cameras, photography equipment, and accessories
Off-the-Shelf Computer Software
Office Equipment (printers, phone systems, computers)
Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs.
Partial Business Use (equipment that is purchased for mixed business use and personal use). Deductions will be based on the percentage of time you use the equipment for business purposes. If you purchase a high-end camera and use it 80% of the time for business, and 20% of the time for personal use, you can deduct 80% of the cost under Section 179.
Can you take Section 179 on leased equipment?
Yes, equipment financed under a capital lease or on an equipment finance agreement still qualifies for the Section 179 deduction. In fact, this is a popular strategy among business owners as they immediately get to write-off up to 100% of their equipment purchase, but pay for it over time as it generates revenue. A capital lease is one with a $1 end-option or 10% PUT/balloon due at the end of the term. Financing equipment at the end of the year and immediately depreciating it under IRS Section 179 can mean BIG tax savings for companies and individuals. Most equipment leasing companies are well versed in Section 179 requirements and can structure your financing to be in compliance. In order for equipment to qualify for 2019 Section 179 deductions, you must purchase or sign an equipment lease or loan before December 31, 2019, at 11:59 PM.
What is Section 179 bonus depreciation?
While both new and used equipment qualifies for write-offs under Section 179, only new equipment qualifies for bonus depreciation. After the Section 179 deduction is used up to the current year’s limit ($1'000,000 for 2019), bonus depreciation can be utilized on the remaining balance. Bonus depreciation expired at the end of 2014, but was reinstated as follows for 2015-2019:
- 100% for 2019
CAMFive EMB do not offer accounting, tax, or legal advice but we do urge you to discuss this with your accountants to see if major tax savings apply to you this year.
If you’re reading this blog post near the end of the calendar year then don’t delay – speak to your tax and accounting advisers today to maximize these tax incentives this year – and make next year the one to restore health and vitality to your workday!