Why purchasing equipment before the end of the year makes sense.
Timing is Everything
The last few months of the year can be hectic for those running a small business. With 2 months left in 2019 you are likely focused on preparing your business for the following year. Part of being prepared is making sure you have the equipment necessary to have a successful 2020. Below are a few reasons to use the last 2 months of the year as a time to acquire equipment for your business.
Another benefit of acquiring equipment before the close of the year are equipment discounts. Many vendors are looking to deplete inventory and that may lead to discounts making the end of the year the ideal time to purchase equipment for your business.
Section 179 Savings
One of the main reasons to pick up equipment before the end of the year is to take advantage of the 2019 Section 179 Tax Deduction (If you have not already). Section 179 allows you to deduct the full price (with limitations) of the equipment purchased in 2019. Section 179 also applies to equipment leases and financing.
If you are looking to see how much you can save with Section 179, use our provided Section 179 Calculator.
Section 179 Explained
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. Leasing equipment that qualifies allows you to deduct the FULL PURCHASE PRICE from your gross income. The U.S. government developed Section 179 to encourage small businesses to purchase equipment will result in the growth of companies.
The benefits of Section 179 have increased over the years. Today, Section 179 is one of the few government incentives available to small businesses and has been included in many of the recent Stimulus Acts and Congressional Tax Bills.
To better explain how this tax deduction can help your business, view the numbers below:
2019 Deduction Limit = $1,0000,000
The Section 179 deduction is good on new and used equipment. To take the deduction for tax year 2019, the equipment must be financed or purchased and put into service between January 1, 2019 and the end of the day on December 31, 2019.
Spending Cap on Purchases = $2,500,000
The maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending limit makes Section 179 a tax incentive tailored to small businesses.
Bonus Deprecitation for 2019 = 100%
Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. The Bonus Depreciation is available for both new and used equipment.