While IRS Section 179 is a permanent tax law that encourages investment, the Tax Cuts and Jobs Act increased the first-year bonus depreciation to 100% for qualified investments.
A permanent tax law that encourages investment, IRS Section 179 allows smaller businesses to immediately write off the full price of qualifying asset purchases (machinery, computers, furniture and other tangible goods) rather than depreciating them over several years. Under the IRS Section 179, a taxpayer may expense up to $1,000,000 of qualified equipment placed in service in 2018 (amounts will be indexed for inflation in future years).
|Year-End Incentives on Lens Processing Equipment
Thinking about purchasing lens processing equipment? The Vision Council recommends saving time and money while preparing your business for the future by investing in the latest lens processing equipment and software to make an exponential difference in your bottom line. In order to qualify for 2018 Federal Government tax incentives and savings, lens processing equipment must be purchased and put into service before December 31, 2018, so act now.“Section 179 is often regarded as an overwhelmingly lucrative decision because it can help lower operating costs, allows businesses to retain more of their tax dollars and provides the opportunity for tax savings to exceed the total of the first year’s payments on the equipment or software,” according to The Vision Council. “In addition to the Section 179 deduction, bonus depreciation is offered at 100% this year.”Rick Clemente, chair of The Vision Council’s Lens Processing & Technology Division, said, “With extended bonus depreciation and an increased limit on Section 179, thanks to the Tax Cuts and Jobs Act of 2017, businesses have the rare opportunity to write off most or all of their new capital equipment from 2018. Businesses should contact their accountants or financial advisors to find out if they can benefit from this new tax law change.”To learn more about Section 179 and 2018 allowances, visit Section179.org or contact The Vision Council’s Lens Processing & Technology Division liaison Paul Wade at PWade@TheVisionCouncil.org.
The rules are designed for small companies, so the $1,000,000 deduction phases out when a business purchases more than $2,500,000 in one year. (Companies cannot write off more than their taxable income.) Section 179 applies to new and used equipment purchases but must be “new to the business.” The asset must be purchased, it cannot be used for property inherited, gifted or leased.
BONUS DEPRECIATION – 100% FOR 2018
The Tax Cuts and Jobs Act increased the first-year bonus depreciation to 100% for qualified investments made in 2018. Bonus depreciation is available for all businesses, is not capped at a certain dollar level and is good for new or used property. The 100% immediate expensing of asset acquisitions will be permitted for tax years 2018 through 2022 before reducing to 80% in 2023, 60% in 2024, 40% in 2025 and 20% in 2026.
BENEFITS OF FINANCE AGREEMENTS AND CAPITAL LEASES
You can maximize the tax benefit with a finance agreement (conditional sales contract) or capital lease. Both allow a business to acquire equipment with a low monthly payment while taking advantage of the Section 179 Expensing allowance and Bonus Depreciation.
Often, the same asset will qualify for Section 179 Expensing allowance and Bonus Depreciation. In this event, you decide what method to use or you may choose to combine methods. If you decide to claim both for the same asset, you must use Section 179 first, then Bonus Depreciation.
Greg Einhorn is president and CEO of Group Financial Services. Email him at GEinhorn@FinServices.com.