Finance Technology

Use It or Lose It

Uncle Sam offsets the cost of acquiring equipment with tax breaks!

With the end of 2021 closely approaching we want to ensure you are fully aware of the details related to Section 179 and Bonus Depreciation. 

 

SECTION 179:

Many business owners are unaware that the acquisition of equipment under a $1 purchase option lease or Equipment Finance Agreement (EFA) qualifies for the tax break provided under Section 179 of the Internal Revenue Code. Subject to limitations, Section 179 allows taxpayers to take an outright deduction equal to the full purchase price of qualifying equipment purchased during the tax year, and a $1 purchase option lease or EFA is considered a purchase under the Internal Revenue Code.

The limitations on the deduction for your tax year includes:

  • a)  an aggregate cap on the Section 179 deduction of $1,000,000
  • b) a dollar-for-dollar reduction in that cap to the extent that the cost of qualifying equipment placed by the taxpayer during the tax year exceeds $2.5 million
  • c)  the deduction cannot reduce taxable income below $0
  • d)  other applicable limitations Contact your tax advisor to confirm how you may benefit from this tax break

 

Bonus Depreciation:

It is now 100% and effective for equipment/software placed in service during your tax year. Both the $1 Purchase Option Lease and Equipment Finance Agreement (EFA) are eligible for this deduction, and new and used equipment qualify. Starting in 2023 this will go down to 80%, in 2024 to 60%, in 2025 to 40%, and in 2026 to 20%. 

Use an Equipment Finance Agreement (EFA) to acquire assets that depreciate, especially when the advantages of using the asset outweigh the low monthly cost. This will free your cash to use on advertising, personnel, inventory, and other needs. It also keeps your cash and bank lines available for unseen opportunities that may arise. 

 

 

The above is promotional material. It does not affect the terms of any contract with us. It is not intended to and does not constitute tax advice. It is based on assumptions that may not apply in your situation. You should contact your own tax advisors to confirm how applicable tax rules apply to your business and your equipment/software acquisition. 

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