If you are wanting to put some money back in your pocket before the end of the year, you could save thousands of dollars on new and used equipment purchases.
Government tax incentives are created to encourage businesses to buy equipment and invest in their businesses. Taking advantage of these opportunities is a great way to help your bottom line.
In the US, Section 179 of the IRS Tax code offers eligible businesses the opportunity to maximize their purchasing power. Almost any new or used equipment that is purchased or financed by your business will qualify for the Section 179 deduction, provided it is new to you. With Section 179, you can deduct the FULL PURCHASE PRICE of any qualifying equipment the year it was put into use. This means a larger expense deduction at the outset than using a standard depreciation method, which reduces the tax burden for a business. It is important to note that section 179 cannot result in a net loss.
The following are key highlights for Section 179 in 2019:
• The maximum deduction amount allowed is $1,020,000
• The most amount of equipment that can be purchased (and take the whole deduction) is $2.5 million
A bonus depreciation (currently 100% expensing) on eligible equipment and property is allowed for in Section 168 (k). You can use both depreciation allowances in your organization, but Section 179 must be used first. Thus, any qualified equipment purchased over the $1 million limit can be taken in bonus depreciation, which is ideal for any business that is spending more than the Section 179 spending limit. Bonus depreciation is slated to phase out in the next 7 Years. (See table below)
Highlights for Section 168(k) Bonus Depreciation in 2019 include:
• Bonus depreciation has grown from 50% to 100% of the cost of both new and used equipment obtained through a third party between September 27, 2018, and January 1, 2023.
• Bonus depreciation is excellent for larger businesses spending more than $2.5 million.
• Equipment must be used for business purposes more than 50% of the time to qualify for these deductions.
• Businesses with a net loss still qualify to deduct the cost of new equipment and carry the loss forward.
Here's a look at the tax savings introduced by bonus depreciation alone with Section 179.
Consult with a tax or legal advisor before you advantage of Section 179 and or depreciation deductions.
In Canada, the Department of Finance has changed the Capital Cost Allowance so businesses can immediately expense 100% of the cost of some new equipment that is purchased after November 20, 2018, and before 2028, meaning this applies to all of 2019. Canadian businesses are also eligible for enhanced tax depreciation write-off if 2019 under the new Accelerated Investment Incentive rules. Canadian businesses are also eligible for an enhanced tax depreciation write-off in 2019 of up to three times the amount that would normally apply. For example, a $100,000 purchase would be eligible for a first-year write off of $10,000 (10% of the capital cost of equipment) provided it was used in the first year. Additionally, businesses can now claim tax depreciation of $30,000 in the first year. (Three times the original amount.)
Now is a great time to take advantage of higher first-year depreciation, call Conquest Equipment today to find out more about our year-end specials
Disclaimer: This should be taken as a general guide. There are multiple limits, exclusions and other rules for different types of businesses in both countries. Every company is different and tax regulations change often. You should always talk to your tax adviser about how these tax-saving opportunities apply to you before making a decision.