Save on Year-End Equipment Purchases Through Accelerated Tax Deductions
The end of the year is fast approaching. Now is a great time to take advantage of powerful tax tools that can help you save money while investing in your business: Section 168(k), also referred to as Bonus Depreciation, and Section 179. These sections offer significant tax incentives to promote business growth, allowing you to upgrade equipment while enjoying substantial savings.
Below, learn more about these important tax-saving tools and how qualifying purchases can benefit your business. Qualifying purchases include financed equipment that is placed in service on or before December 31, 2024.
Save with Section 179
Popular among small and medium sized businesses, Section 179 allows businesses to immediately expense qualifying equipment in the year of acquisition. This allowance creates a larger initial deduction and reduces a business’s tax burden in the year the equipment is placed in service.
The maximum amount of Section 179 for 2024 is $1,220,000 on qualified purchases of $3,050,000. Section 179 is reduced dollar for dollar when total equipment purchased exceeds $3,050,000, hitting zero at $4,270,000 of qualifying purchases. In addition, an income limitation limits a business’s Section 179 expense to taxable income, not allowing Section 179 expense to create a tax loss.
If these limits impact your business’s ability to use Section 179, you may still qualify for Bonus Depreciation.
Section 168(k): Bonus Depreciation
Bonus Depreciation is another tool to accelerate expensing of capital expenditures, but without many of the limitations. Bonus depreciation is percentage based, allowing a business to immediately expense a percentage of an asset’s cost before applying normal depreciation.
Businesses can currently expense 60% of the cost of qualified assets. This percentage is only applicable for assets placed in service on or before December 31, 2024. It is scheduled to drop as follows in the coming years:
- 40% in 2025
- 20% in 2026
- and 0% in 2027 and thereafter.
How Much Money Could You Save?
Section 179 and Section 168(k) are valuable tools for businesses seeking to reduce their tax liabilities and invest in growth. To ensure you make the most of these opportunities, it is essential to work with tax professionals who can help you navigate the complexities and confirm your businesses eligibility.
Below, see hypothetical savings possible when utilizing these code sections as compared to normal depreciation.
*The calculations above are an example and not intended to provide tax or legal advice. Please consult your tax advisor.
Ready to Learn More? Contact Altec Capital Today
If you’re interested in applying these tax benefits to your purchases, our knowledgeable finance experts at Altec Capital are ready to help you find the best options to achieve significant savings.
Altec Capital offers deferrals up to 90 days, aggressive financing rates and a variety of lease options. Altec Capital’s focus is meeting customers’ unique equipment financing needs. Most importantly, financing with Altec Capital is easy. Altec Capital offers a single source solution for all your financing needs, which means no more managing multiple banking relationships.
For more information on Altec Capital’s financing options, call (888) 408-8148 or email finance@altec.com.