There is no better time than now to invest in your business – whether it's upgrading your computer network or purchasing new equipment. The cost of capital (in terms of interest rates) is at an all-time low. And current tax laws offer tangible benefits for owners who upgrade, modernize and invest in their business.
Harvest Some Tax Savings
The American Taxpayer Relief Act (aka the "Fiscal Cliff Bill") provides some exceptional opportunities for businesses purchasing new or used equipment in 2013. By properly using "accelerated depreciation," you may be able to harvest some immediate tax savings – and increase cash for other needs.
• Section 179 Depreciation — Under Section 179 of the tax code, businesses may deduct the full purchase price of qualifying equipment purchased or financed during the tax year, up to stated limitations. For 2013, you can immediately depreciate up to $500,000 of the value of qualifying new or used equipment that you buy or lease.
• Bonus Depreciation — After taking the Section 179 deduction, businesses may then be eligible to deduct an additional 50 percent of the remaining balance as a first-year "bonus" depreciation. Note that, unlike Section 179 depreciation, bonus depreciation is available only for new equipment purchases.
Here's how it might look if you made a qualifying purchase:
Equipment Purchased $300,000
1st Year Write-off $300,000
Total 1st Year Deduction $300,000
Marginal Tax Rate (assume highest) 40%
Tax Savings $120,000
Net 1st Year Cost of Equipment $180,000
The Section 179 deduction was designed with businesses in mind. So, almost all types of "business equipment" qualify, including:
- Tangible personal property used in business (machinery, equipment, furniture, fixtures, signs, etc.)
- "Off-the-shelf" software (i.e., software that is not custom designed and is available to the general public)
- Business vehicles
Some items that do not qualify for the Section 179 deduction include real property – such as land, buildings and permanent structures, including paved parking areas and fences – and heating, ventilation and air conditioning (HVAC) equipment.
Note that previously owned equipment (but new to you) qualifies for the Section 179 deduction. However, used equipment does not qualify for bonus depreciation.
To reap these tax benefits, the equipment must be purchased and put into use by the end of the year. In the eyes of the IRS, it must be "ready, available and capable of performing its function" by midnight of Dec. 31, 2013.
To learn more about financing equipment for your business, contact your Relationship Manager.
To learn more, please call (888) 804-6450.