Now may be the time for your company to purchase equipment and take advantage of the increased limits for Section 179 deduction benefit included in the Tax Cuts and Jobs Act.
Section 179
Section 179 allows businesses to deduct the full cost of qualifying new and used equipment from your 2023 taxes, up to $1,160,000. The ability to take deductions under Section 179 now begins to phase out for total equipment purchases in excess of $2,890,000. The phase out is on a dollar dollar-for -dollar basis once equipment purchases exceed $2,890,000. Equipment must be purchased and placed into service by December 31, 2023.
Bonus Depreciation
The Act also increases the benefit of bonus depreciation, allowing businesses of all sizes to deduct the full cost of qualifying new and used equipment purchased and placed into service by December 31, 2023.
Many types of equipment may qualify:
- Agricultural
- Commercial Truck and Trailers
- Construction
- Survey Equipment
- Manufacturing
- Material Handling
- Medical
- Office Equipment and Technology
- Printing Presses
- Rail
What this may mean for your company:
- May be more economical to upgrade equipment
- Lower tax liability for the year conserves working capital for other immediate business needs
- Many leasing or financing options can be utilized while taking advantage of the tax incentives
2023 Example Calculation
| Total 2023 equipment investment | $1,500,000 |
| Section 179 deduction limit | $1,160,000 |
| 80% bonus depreciation available for excess* | $272,000 |
| Total 2023 tax deduction: $1,160,000 + $272,000 | $1,432,000 |
| Potential tax savings on the first year (assuming a 21% tax rate) | $300,720 |
Want to talk about leveraging this tax credit for your equipment purchases before the end of the year? Contact [email protected] for more.
*Note: Section 179 should be considered after consultation with your business owner or a tax advisor for implementation during 2023*