The Tax Cuts and Jobs Act of 2017 provides businesses with additional tax benefits for 2018 and beyond.
Under Section 179, businesses spending less than $2,590,000.00 a year on qualified equipment may write off up to $1,040,000.00 upfront.
100% Bonus Depreciation on qualified equipment acquired and placed in service from September 27, 2017, through December 31, 2022. The bonus depreciation now includes used equipment. It falls to 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and expires in 2027.
The $1,040,000.00 deduction from Section 179 phases out when a business purchases more than $2,590,000.00 in one year.
Companies cannot write off more than their taxable income.
The equipment must be placed in service by the end of the tax year.
What does this mean for businesses?
Our capital leases help businesses take advantage of the tax benefits (above) by extending payments out as long as 5 years.
Tax Savings could be greater than the amount paid in the first year of a capital lease.
Section 179
Tax Deduction Calculator
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COST OF THE EQUIPMENT:
(100% in 2020)
(after Tax Savings)
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.
Example Calculation Using the Section 179 Calculator
Using a $75,000 equipment cost for a sample calculation shows how taking advantage of the Section 179 Deduction can significantly lower the true cost of the equipment purchased, financed or leased. In our example, $75,000 in equipment purchased has a true cost of $48,750. That’s $26,250 saved. Would you like an extra “25 grand-plus” this year on equipment you needed anyway?
In order to qualify for the Section 179 Deduction, the equipment must be purchased, financed or leased equipment and put into service by December 31 of this year!
What is the Section 179 limit for 2020?
The maximum Section 179 deduction for the 2020 tax year is $1,040,000. That deduction phases out for companies that spend over $2,590,000 on equipment per year. These numbers are adjusted each year for inflation. Equipment acquisitions beyond this limit are still depreciable using bonus depreciation.
Does leasing packaging equipment qualify for Section 179?
Capital leases are considered to be ordinary equipment acquisitions for tax purposes, so they’re eligible for Section 179 and bonus depreciation.
Does packaging equipment qualify for bonus depreciation?
Yes, as long as it enters service in the year in which the depreciation is taken. This applies to both new and used equipment.
Does bonus depreciation have a limit?
Yes. Even with 100% bonus depreciation, you still can’t write off more than your taxable income.
American Packaging Capital, Inc. is not offering legal, tax, accounting, or financial advice. Customers are encouraged to consult with their tax and accounting advisors for a clear understanding of how these tax benefits and/or various equipment financing products could impact their specific business conditions. For complete details or changes to the tax incentives, please visit www.irs.gov or contact the IRS helpline at 800-829-4933
