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Section 179: What Facts You Should Know About Upcoming Tax Changes

2012 is coming to a close and businesses across the country are starting to evaluate their year-end tax situation. This year under Section 179, businesses that spend less than $530,000 a year on qualified equipment, may write-off up to $134,000 in 2012. The rules are designed for small companies, so the $134,000 deduction phases out when a business purchases more than $530,000 in one year. Additionally, some companies are able to deduct special bonus depreciation up to $500,000 part of the financial stimulus legislation passed a few years ago. Unless Congress acts, we will see an increase in tax rates and the phase out of the bonus depreciation allowances in 2013.

The time to acquire equipment and take full advantage of the tax incentives is now. It has not been cheaper or easier to upgrade,acquire, and replace equipment than in 2012. Rates and lending are at the most aggressive levels we have seen in years. Make sure to take full advantage before time runs out and the planned tax increases come into place in 2013.

ACT NOW BEFORE THE TAX LAW CHANGES!

Business Equipment

Business owners who acquire equipment for their business: machinery, computers, and other tangible goods, usually prefer to deduct the cost in a single tax year, rather than a little at a time over a number of years. This deduction is known by its section in the tax code, a Section 179 deduction.

Under Section 179, businesses that spend less than $530,000 a year on qualified equipment, may write-off up to $134,000 in 2011. The rules are designed for small companies, so the $134,000 deduction phases out when a business purchases more than $530,000 in one year. (Companies cannot write off more than their taxable income).

In 2012 business were able to obtain bonus depreciation even after spending $134,000 for equipment. For 2013 this special bonus depreciation is set to expire.

Benefits of a Non-Tax/Capital Lease

The benefit of a Non-Tax/Capital Lease is that it can take advantage of Section 179: expense up to $134,000 if the equipment is put in use in 2011. In addition, you may depreciate any excess on the depreciation schedule for that asset. Examples of Non-Tax/Capital Leases include a $1.00 Buyout Lease, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease. Example: Assume you finance business equipment, put it in use in 2012, and take advantage of Section 179. Your tax savings could be significant:

Act Now!

To take advantage of the incentives and the substantial tax savings, your business equipment must be put in use by year-end. Please contact your tax advisor to learn about the specific impact to your business. Not all companies will qualify for the credit.

Interested in learning more? We’ll provide you with a free consultation and extend finance solutions so you can acquire the business equipment you need. Call 916-230-4699 and ask for Arvind.

For more information about the details of what section 179 is and details, please see our Section 179 Flyer

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One thought on “Section 179: What Facts You Should Know About Upcoming Tax Changes

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