|Navigate Through Uncertain Economy||See how you can take advantage of the tax benefit being offered|
Want to lower the true cost of ownership
on your business equipment? Here's how:
Business owners who acquire equipment for their business: machinery, computers, and other tangible goods, usually prefer to deduct the cost in a single tax year, rather than a little at a time over a number of years. This deduction is known by its section in the tax code, a Section 179 deduction.
The benefit of a Non-Tax/Capital Lease is that it can take advantage of Section 179: expense up to $500,000 if the equipment is put in use in 2013. In addition, you may depreciate any excess on the depreciation schedule for that asset. Examples of Non-Tax/Capital Leases include a $1.00 Buyout Lease, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease. Example Calculation: Assume you finance $500,000 worth of business equipment, put it in use in 2013, and take advantage of Section 179. Your tax savings could be significant compared to 2012.
First Year Write Off:
$500,000 Maximum in 2013
50% Bonus Depreciation:
$700,000 - $500,000 = $200k x 50%
Normal First Year Deduction:
20% in each of 5yrs on remaining amount
Total First Year Deduction:
$500,000 + $100,000 + $20,000
$620,000 * 39.6% (Assuming 2013 39.6% Tax Bracket)
Lowered Cost of Equipment after Tax Savings
** 50% Bonus Depreciation can be only taken on new equipment purchases before the end of 2013.
The election, which is made on Form 4562, is for the tax year the property was placed in service or an
amended return filed within the time prescribed by law. The total cost of property that may be expensed
for any tax year cannot exceed the total amount of taxable income during the tax year. Section 179
property is property that you acquire by purchase for use in the active conduct of your business. To
ensure property qualifies, reference Publication 946.
This expense deduction is provided for taxpayers (other than estates, trusts or certain non-corporate lessors) who elect to treat the cost of qualifying property as an expense rather than a capital expenditure. Under Section 179, equipment purchases, up to the amount approved for a given year, can be expensed (deducted from taxable income) if installed by December 31st. Non-Tax leases qualify for this deduction in their year of inception. Any excess above the expensed amount can be depreciated depending on the equipment type. Not all states follow federal
Reminder: to take advantage of the 2013 tax incentives, your business equipment must be put in use by year-end. Each company should contact their tax advisor to learn about the specific impact to your business. Interested in learning more? We’ll provide you with a free consultation and extend finance solutions so you can acquire the business equipment you need. Contact us today.
If you want to take advantage of Section 179, you must finance the equipment before Dec 31, 2013.