You can save a ton of money on your taxes by getting your new equipment now. With a capital lease ($1 buy out in 5 years) you are allowed (by IRS Section 179) to write off up to $1,000,000 in the first year. Here are the numbers for a 35% tax bracket:
(*Bonus depreciation is offered some years, and some years it isn’t. Right now in 2019, it’s being offered at 100%.)
The 2019 spending cap for expenditures is $2,500,000.
Here is the Section 179 Calculator used for a smaller amount:
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2019 should qualify for the Section 179 Deduction (assuming they spend less than $3,500,000).
Most tangible goods used by American businesses, including “off-the-shelf” software and business-use vehicles (restrictions apply) qualify for the Section 179 Deduction.
Section 179 Qualifying Property
Section 179 was designed with businesses in mind. That’s why almost all types of “business equipment” that your company buys or finances will qualify for the Section 179 deduction.
All businesses need equipment on an ongoing basis, be it machinery, computers, software, office furniture, vehicles, or other tangible goods. It’s very likely that your business will purchase many of these goods during the year, and will do so again and again. Section 179 is designed to make purchasing / leasing that equipment during this calendar year financially attractive.
Material goods that generally qualify for the Section 179 Deduction
Please keep in mind that to qualify for the Section 179 Deduction, the equipment listed below must be purchased and put into use between January 1 and December 31 of the tax year you are claiming.
Equipment (machines, etc.) purchased for business use
Tangible personal property used in business
Business Vehicles with a gross vehicle weight in excess of 6,000 lbs (see Section 179 Vehicle Deductions)
Computer “Off-the-Shelf” Software
Property attached to your building that is not a structural component of the building (i.e.: a printing press, large manufacturing tools and equipment)
Partial Business Use (equipment that is purchased for business use and personal use: generally, your deduction will be based on the percentage of time you use the equipment for business purposes).
Certain improvements to existing non-residential buildings: fire suppression, alarms and security systems, HVAC, and roofing.
Please note – the above equipment qualifies whether new or used (but must be new to you), and also regardless of whether it was purchased outright, leased, or financed.
Section 179 can change each year without notice (Section 179 has even changed mid-year), so it benefits you to take advantage of this generous tax code while it’s available.
Section 179 offers small businesses a great opportunity to maximize purchasing power. In addition, recent changes have provided the small business owner with generous new (and higher) deduction limits. Most of the equipment your business will purchase, finance or lease qualifies for the deduction (see Section 179 Qualified Financing), so make sure you do your homework to verify that your company is leveraging the Section 179 Deduction this year.
Why Use Section 179? (from Section179.org)
Successful businesses take advantage of legal tax incentives to help lower their operating costs. The Section 179 Deduction is a tax incentive that is easy to use, and gives businesses an incentive to invest in themselves by adding capital equipment – equipment that they use to improve their operations and further increase revenue.
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves.
In short, taking advantage of the Section 179 Deduction will help your business add equipment, vehicles, and software, while allowing you to keep more of your tax dollars.
Section 179 is simple. You buy, finance, or lease qualifying equipment, vehicles, and/or software, and then take a full tax deduction on for this year.
Take special note of the total savings on your tax obligation. Many people find that if they lease or finance their Section 179 qualified equipment, the tax savings will actually exceed the total of the first year’s payments on the equipment, which makes buying equipment profitable for the current tax year. This is perfectly legal, and a good example of the intended incentive that Section 179 provides to small and medium businesses.”
Advantages of Leasing and Financing
The obvious advantage to leasing or financing equipment and/or software and then taking the Section 179 Deduction is the fact that you can deduct the full amount of the equipment and/or software, without paying the full amount this year. The amount you save in taxes can actually exceed the payments, making this a very bottom-line friendly deduction. (You are reading this correctly. In many cases, the tax savings from the deduction will make your bank account larger than if you never financed the equipment in the first place.)
Leasing & Section 179
The main benefit of a non-tax capital lease is that you can still take full advantage of the Section 179 Deduction, yet make smaller payments. With a non-tax capital lease you can acquire and write-off up to the deduction limit worth of equipment this year, without actually spending that amount this year.
In other words, a small business that is managing cash flow can leverage a non-tax capital lease to minimize out-of-pocket cash, and still take the full Section 179 Deduction.
In many cases, the amount you save in taxes will be MORE than the total of your first year’s payments.
TAKE ACTION NOW!
So what have you got to lose? Get a quote now for your equipment leasing needs and end enjoy a huge government-sponsored tax discount. Contact me at email@example.com or call 226-979-6036 to book an appointment.