An IRS tax code that presently allows businesses to immediately deduct up to $500,000 on qualifying New and Used equipment and software purchases.
Strategically purchasing equipment or technology for your business this year could signiﬁcantly reduce your cost of ownership.
It provides substantial tax relief for companies who elect to treat the purchase of qualifying equipment as an expense rather than a capital expenditure.
There is a 50% bonus deduction for NEW equipment.
The Nitty-Gritty on How You Can Take Advantage of This
(The deduction is NOT automatic. You need to do the proper paperwork.)
Part One of IRS form 4562.
Ordinarily all material goods qualify for the deduction. BUT this equipment must be purchased AND put into use during the tax year.
Some examples of qualifying purchases include:
- Capital equipment
- Office equipment
- Business vehicles (gross weight in excess of 6,000 lbs.)
How much of a write-off?
For the 2013 tax year, businesses may take a 100% deduction on purchased or leased equipment (as long as the total is below $500,000).
The maximum deduction allowable?
The limit is back up* to $500,000 for equipment deductions.
When can you take advantage of this? Act Fast!
The deadline for the purchase and deployment of eligible equipment is December 31, 2013. (Make this deduction as you file your tax return for the year.)
Purchase vs. Lease
This depends on your businesses situation. Important: With the Section 179 deduction, you can write off 100% (up to $500,000) of the price of your qualifying equipment but you don’t have to spend 100%. With a properly structured lease, your tax deduction can actually be more than your first year of payments.
Section 179 Limitations
The Section 179 limit for 1st year expense in 2013 is now $500,000. This can be applied to both new and used equipment. What this could mean for your business: Instead of depreciating a newly acquired asset over several years, the Section 179 expense allows a business to take a current year deduction of the full purchase amount up to $500,000 for assets under $2,000,000. This beneﬁt begins to decline after total new asset acquisition tops $2,000,000. Over $2,000,000, the amount you can deduct decreases by $1 for every dollar spent above $2,000,000.
* Section 179 has been affected by various Stimulus Acts enacted by congress mostly specifically related to the dollar limits of the deduction.
2007 Deduction Limit: $125,000
2008 Deduction Limit: $250,000
2009 Deduction Limit: $250,000
2010 Deduction Limit: $500,000
2011 Deduction Limit: $500,000
2012 Deduction Limit: $139,000
2013 Deduction Limit: $500,000
That’s an increase of a little over $360,000 from 2012.
Deduction decreases dollar-for-dollar after equipment purchase totals exceed the
2007 Total equipment purchases: $500,000
2008/2009 Total equipment purchases: $800,000
2010/2011 Total equipment purchases: $2,000,000
2012 Total equipment purchases: $560,000
2013 Total equipment purchases: $2 million
Take advantage of this NOW because Section 179 limits are slated to decrease next year!
What Savings Looks Like:
|Your Equipment Cost||$75,000|
|Section 179 Deduction (up to $500,000)||$75,00|
|50% Bonus Deduction *only for new equipment (Equipment Cost – Deduction) x 50%||$|
|Total First Year Deduction (Section179 Deduction + Bonus Deduction)||$75,000|
|Total Savings (Total Deduction x Tax Rate) (Assuming a 35% tax bracket)||$26,250|
|Equipment Cost After Savings (Equipment Cost – Total Savings)||$48,750|
Go to http://www.section179.org/section_179_calculator.html to calculate your deduction and tax savings.
Therese Yacenda is the Social Media Manager at Accelerated Buy Sell, Inc. and Manufacturing Web Solutions as well as a contributing author to the blog. She orchestrates the social media landscape for the “Accelerated Group of Companies” that provides tools and services to help manufacturers grow and exit strategies to maximize dollars when they are ready to retire or sell their manufacturing business. Accelerated’s group of companies that provide services to the manufacturing industry includes:
www.AcceleratedBuySell.com – Provides Online Industrial Auction Services, Used Equipment Auctions, Capital Equipment Auctions, Plant Liquidations, Industrial Plant Cleanout Services, Used Machinery Location Services, Certified Machine Tool and Equipment Appraisals, and more.
www.AcceleratedMfgBrokers.com – Specializes in Manufacturing Business Brokerage and Mergers and Acquisitions. We help manufacturers develop exit strategies to maximize retirement dollars, and successful manufacturers expand through acquisition of other manufacturing companies, product lines and customer lists. Manufacturing Companies for sale throughout the United States are listed on this site.
www.AcceleratedRE.com – Provides Industrial Real Estate Brokerage Services, Online Real Estate Auctions, Sealed Bid Real Estate Auctions and complete industrial facility cleanout services.
www.IgniteMfg.com – Provides funding for products made in the USA, and engineering/manufacturing educational needs through Crowd Funding.
www.MfgWebSolutions.com – Provides web development and social media services for manufacturers at under-market rates.
Therese Yacenda is a contributing author to:
blog.AcceleratedBuySell.com - A site that provides the latest manufacturing news, statistics and opinion. It also provides information on how to grow a manufacturing business, and what to do if you are a manufacturing company that needs to close.
MFGWebSolutions.com/blog - Provides the latest information on social media and web development for manufacturers. It gives manufacturers tips and tricks for boosting their web presence.