The current tax law offers significant benefits when you purchase most forms of capital equipment for your business. Section 179 of the IRS Code allows businesses to take a depreciation deduction for certain assets in one year, rather than over a long period of time. The deduction applies to assets under two conditions:
- Assets must be tangible, depreciable, and acquired for the use in a trade or business. Vehicles, land and buildings are included.
- THEY MUST BE PURCHASED AND PUT INTO SERVICE IN THE YEAR YOU CLAIM THE DEDUCTION. Put into service means the asset is set up, working, and is actively being used in your business.
Richard Spruit, CEO, shared his thoughts and words of the wise.
“The combination of Section 179 and bonus depreciation will result substantial tax benefits. A predictable rule of thumb is that you will save 21% (current corporate tax rate) of the purchase price of your capital equipment as the purchase price is fully deducted from your taxable income. Twenty-one percent of a typical truck scale installation results in a cash savings of between $15,000 to $20,000.
As an equipment dealer, we must remind you of one key aspect of this law. You cannot wait until the end of the year, order equipment and expect to be able to deduct the price against your 2018 income. Per the Tax Code, to avail yourself of Section 179 and bonus deductibility, YOU MUST ORDER AND HAVE THE EQUIPMENT PLACED IN SERVICE BETWEEN 1/1/18 AND 12/31/18. If your equipment is ordered before the end of the year but not received until after 12/31, you will not be entitled to the deduction this year.
Right now, our manufacturers are very busy. Some of our suppliers are quoting back-ups on truck scale orders of 10 to 12 weeks. The same is true for many system components.
As your vendor, we will make every attempt to deliver your orders in a timely manner. If you want your equipment deductions this year, you’d be wise to order early. Consult with your own tax advisors on how the law applies to you.”
We don’t want you to miss out on being eligible for the tax deduction. If you’re going to purchase a large asset for your company, don’t wait last minute.