Now may be your last chance to purchase one of CIP’s industry-leading VRC’s and be able to write off 100% of the total purchase price for the current tax year. Yes, that is correct. The Government is offering two tax benefit programs geared towards encouraging small and medium businesses to buy equipment. But time is of the essence, as these programs can change each year without notice. Of course, there are some stipulations and regulations that you need to be aware of.
Read on as we provide some insight into these programs and how you can take advantage of them before it’s too late.
Section 179
The first deduction we want to discuss is the Capital Expenditure, Section 179 tax deduction. This tax deduction can help a business substantially lower their tax burden for the 2020 tax year.
According to Investopedia, Section 179 of the U.S. internal revenue cost is “an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset of a period of time.”
So, what does this mean?
Very simply, if a business owner purchases or finances equipment (like a VRC) up to $1,040,000 (total equipment purchase limit of $2,590,000) for the 2020 tax year, said business can write off the entire cost of the equipment in one lump sum. Rather than capitalizing and then depreciating the asset over several years. This can give business owners substantial tax relief and an incentive to expand their business by purchasing new equipment.
Example:
Let’s look at a real-life example. Imagine ‘Company A’ purchases a piece of equipment entirely for business use for $100,000 and zero salvage value. When it comes to tax time ‘Company A’ has two choices. They can either take the asset and depreciate It over 5 years at $20,000 each year ($20,000 * 5 = $100,000), or, with Section 179, they could deduct the entire $100,000 in the current year in the form of a write off, thereby reducing their tax liability by $100,000. Do you see how powerful this is?
What’s Covered?
The Section 179 expense deduction is limited to items such as cars, office equipment, business machinery, tangible personal property used in business and computers, and some other items. Both new and used qualified equipment are eligible. A VRC would fall under these requirements.
As if Section 179 wasn’t good enough, there is also bonus depreciation that can be used on its own or in conjunction with Section 179.
Bonus depreciation allows a business owner to deduct 100% of the cost of eligible equipment and property in the first year it’s placed in service. Although not as flexible as Section 179, it has its own advantages for reducing a business owner’s tax burden. The one key difference between the two is that Section 170 allows a business to expense a cost of qualified property immediately, while bonus depreciation allows a business to recover that cost of equipment over time.
Both Section 179 and bonus depreciation can be used together, but Section 179 must be used first. For example, Section 179 is taken (unless the business has no taxable profit) first to reduce the cost of the equipment or property purchased, then bonus depreciation is taken after to decrease the remaining cost of the property over its life.
In Closing
If you’re thinking about a VRC lift to increase efficiency and safety, don’t wait; now is the time to act! Not only are they 75% less expensive than a freight elevator, but for a limited time, you can take advantage of two very advantageous programs to offset your tax burden.
Don’t miss out on this opportunity to optimize your workflow with a VRC lift! To get started, contact your knowledgeable CIP representative today!
As always, check with your Tax Accountant/Finance Department to see how these deductions could benefit you.