FRIENDLY REMINDER THAT IF YOU ARE CONSIDERING MAKING A MAJOR PURCHASE THIS YEAR, YOU CAN TAKE ADVANTAGE OF SECTION 179 OF THE TAX CODE.
While Reagan made fun of Government helping people, there are some tax benefits that indeed help small business with purchases for their business.
Section 179 is a tax deduction that can be taken on capital purchases. For the 2015 tax year, the Deduction limit is $25,000. So, if you were considering purchasing a uv coating machine, a hydraulic paper cutter or wide format laminator, Section 179 can help you reduce your purchase cost with a tax credit.
This tax rule allows qualified section 179 equipment purchases to be fully deducted in the first year that they are purchased, financed, or even leased.
- Deduction Limit: The deduction limit is $25,000. Most new and used capital equipment purchases, some software, and even vehicles (within limits) qualify.
Most of the time, section 179 equipment purchases take the full deduction for the first $25,000 worth of deductions. The bonus deduction might be applied for new equipment if the deduction exceeds the Section 179 limits. If a business does not have any income to use the deduction for in the year of purchase, it can carry the deduction over to the next tax year.
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What Type Of Equipment Qualifies?
If you have been looking at purchasing a new UV Coater as an example, here it is what the potential cost savings could be if you take advantage of Section 179.
Tec Lighting 16″ TruCoat Auto Feed UV Coating System:
Here is an estimated calculation for a uv coating machine:
Cost: $23,900
Bonus Deprication Deduction: $0
(currently not available this tax year)
Normal 1st Year Depreciation: $0
Total First Year Deduction: $23,900
Cash Savings on Purchase: $8,365.00
(Estimated 35% Tax Bracket)
Lowered Cost of Equipment: *$15,535
Triumph 7260 Hydraulic Paper Cutter
Here is the *estimated calculation for a Triumph Paper Cutter.
Cost: $23,999
Bonus Deprication Deduction: $0
(currently not available this tax year)
Normal 1st Year Depreciation: $0
Total First Year Deduction: $23,900
Cash Savings on Purchase: $8,399.65
(Estimated 35% Tax Bracket)
Lowered Cost of Equipment: *$15,599.35
Thinking about upgrading to a Rhin-O-Tuff Binding Machine?
Rhin-O-Tuff HD7000K Punch Binding Machine
Cost: $4,850
Bonus Deprication Deduction: $0
(currently not available this tax year)
Normal 1st Year Depreciation: $0
Total First Year Deduction: $4,850
Cash Savings on Purchase: $1,697.50
(Estimated 35% Tax Bracket)
Lowered Cost of Equipment: *$3,152.50
Or, maybe you need a wide format laminator?
D&K Expression 62” Commercial Roll Laminator
Cost: $11,000
Bonus Deprication Deduction: $0
(currently not available this tax year)
Normal 1st Year Depreciation: $0
Total First Year Deduction: $11,000
Cash Savings on Purchase: $3,850.00
(Estimated 35% Tax Bracket)
Lowered Cost of Equipment: *$7,150.00
*The calculator presents a potential tax scenario based on typical assumptions that may not apply to your business. This page and calculator are not tax advice. The indicated tax treatment applies only to transactions deemed to reflect a purchase of the equipment or a capitalized lease purchase transaction. Please consult your tax advisor to determine the tax ramifications of acquiring equipment or software for your business.
Note that vehicle deductions are limited This is because the first year that the law came out, people started to jokingly refer to it as the “Hummer Law.” Many business owners used this rule to purchase nice cars for their business and personal use. Passenger cars might still qualify, but purchase deductions are limited to $11,060. Vehicles that are more likely to be purchased exclusively for business use can still qualify for the full deduction.
Otherwise, most types of capital equipment and some software qualifies. This includes tangible equipment, print finishing equipment, computers, off-the-shelf software, and furniture. For example, a new UV coating machine and Section 179 would be a great fit. You will not have to worry about exceeding the limit if you just plan to use your purchase of a new uv coating machine and section 179.
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Remember To Take Advantage Of Section 179
You can take advantage of this additional tax deduction for purchases put in service during this tax year. The ability to deduct the entire purchase, lease, or financing expense might enable your business to grow much faster. That is exactly what the law was intended to do.
