Section 179 Capital Equipment Deduction For US Customers
on February 15, 2017,
While most bakers are focused on creating the best tasting products in town, many business managers are keeping an eye on the books and looking for ways to improve the bottom line.
One way to grow your bakery is to purchase new equipment to reduce waste and streamline production. For the past few years, the government has offered Tax Code Section 179 as a break for businesses looking to add capital equipment to their lineup. The Section 179 deduction allows you to deduct the entire purchase price of qualifying equipment purchased this year on this year’s taxes instead of depreciating that equipment over time.
For example, if you purchase a $100,000 bakery machine, the normal depreciation would be $20,000 for the first year (calculated by 5 years = 20%, so $100,000 x 20% = $20,000). With a normal tax savings assumed rate of 30% (20,000 x 30%) the tax savings is $6,000 in the first year.
If the equipment is purchased or leased through the Section 179 program, the full amount deducted for the first year of ownership is $100,000, and using the assumed tax savings rate of 30% a total of $30,000 ($100,000 x 30%) would be the tax savings for the first year, effectively making the price of the machine $70,000, rather than $100,000 ($100,000 – $30,000). Now that’s some serious numbers!
Section 179 offers benefits to business owners in deductions as well as depreciation benefits. If you have additional questions about how Section 179 can work for you and your business we encourage you to contact or meet with your accountant to explore the possibilities.