How will the government help pay for new equipment for your business?

August 20, 2015

 

It sounds too good to be true, but it's not.  Section 179 allows businesses to take full or accelerated depreciation of equipment you purchase or lease in any given tax year up to certain limits. What does that mean?  Well, in 2014 if you were to finance equipment costing $25,000, you may be able to write that full amount off from your federal taxes, even if the money coming out of your pocket is only a fraction of that.

For example, let's say you took out an equipment lease for $500/month for 60 months on a $25,000 piece of equipment. You took the lease in August and make 5 payments*$500 or $2500 in payments.  Under Section 179. you are able to write off $25k as long as you are reporting a profit.  Assuming a 35% tax bracket, that is$8,750 in Federal Tax Savings! Your cash flow  would be positive $6,250 after accounting for the equipment lease payments. But it gets even better!

You might be asking, "what if I'm looking at equipment over $25,000?" This is the current limit for the deduction for 2015. In the past few years, the U.S. Congress has extended the deduction late in the year retroactively. In 2014, the limit was $500,000 and it is a good bet that will happen again. Nevertheless, the $25k deduction still is a good deal. If you were to purchase $100,000 worth of equipment on lease for 3 years, the current limit would allow you to take accelerated depreciation of $25k in year 1, PLUS  another $33k of normal Year 1 depreciation. That's a total of $58k of depreciation in the first year.

Now, everyone has a different tax situation and I would encourage business owners to check with a CPA or other tax consultant on exactly how their business could take advantage of this tax break. But I do know I have helped many businesses finance equipment over the years because their accountants had advised them that financing equipment would help them reduce taxes and maximize cash flow. If you are interested in learning more please don't hesitate to contact me at 508-528-2418 or please visit http://www.copleyfunding.com

 

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August 20, 2015

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