Updated: Apr 6, 2020
You could save thousands of dollars on new and used equipment purchases in the U.S. if you take advantage of tax incentives the government created to encourage businesses to buy equipment and invest in themselves.
IRS Tax Code: Section 179
Maximize your purchasing power with Section 179 by deducting the full purchase price of qualifying equipment in the year it was put into service. This creates a larger initial expense deduction than using a standard depreciation method, which reduces your company's tax burden.
Most of the new and used (must be new to you) equipment your business purchases or finances will qualify for the Section 179 deduction:
Maximum amount that can be deducted is $1 million
Maximum amount of equipment purchased (and take the full deduction) is $2.5 million
More Savings: Section 168(k) Bonus Depreciation
Similar to Section 179, Section 168(k) allows for bonus depreciation on eligible equipment, which leads to accelerated depreciation for a reduced tax burden. Bonus depreciation has been increased from 50 to 100 percent of the cost of both new and used equipment (must be new to you) obtained between September 27, 2017, and January 1, 2023.
A company can take both Section 179 and bonus depreciation allowances, but Section 179 must be applied first, meaning any qualifying equipment purchases exceeding Section 179's limits may be taken in bonus depreciation.
To qualify for bonus depreciation deductions, your equipment must be used for business purposes more than 50 percent of the time. Businesses with a net loss are still qualified to deduct the cost of new equipment and carry forward the loss.
Bonus depreciation is schedule to phase out over the next seven years:
Section 179 & Bonus Depreciation in Action
The table below shows an example of how your tax savings can add up if you use both tax incentives after purchasing $1.5 million in equipment:
Get Equipment by December 31 for 2019 Tax Savings
Volvo CE has introduced several new equipment models throughout 2019 that feature impressive efficiency, reliability, and performance.
To apply Section 179 and bonus depreciation savings to your 2019 taxes, your equipment must be purchased in 2019 and put into service by midnight on December 31, 2019.
Contact your Highway sales representative to add a new or used machine to your fleet. If you have additional questions about the advantages of Section 179 and bonus deprecation, check out these FAQs or talk to your tax adviser.
Based on article originally posted by: Volvo CE