First Year Bonus Depreciation 2021 Update [Equipment Financing]

By Carl Nadig| Feb 25, 2021| 4531 Views
First Year Bonus Depreciation 2021 Update [Equipment Financing]

Did you know you can deduct 100% of your equipment’s purchased value beginning the first year you bought it?

How to get a bigger 2021 tax refund

You can use your equipment’s purchased value in a tax incentive known as bonus depreciation. Financing equipment in 2021 could be the smartest thing you do for your business and your tax return.

  • Conserve Cash - Finance the new or used equipment you need for a low monthly payment.
  • Earn As You Finance – Put the equipment to use earning revenue for your business.
  • Tax Savings - Write off the FULL purchase price of the equipment on your 2021 income tax return.

How does it work? Bonus depreciation allows businesses to deduct the cost of eligible purchases the year they acquire them (rather than spreading the cost over time). As long as you use your equipment the majority of the time for your business, that long-term asset is tax-deductible.

Bonus Depreciation for 2021

The amount offered for bonus depreciation changes every year. This year’s bonus depreciation is currently at 100%.

2021

2020

2019

2018

Deduction remains at 100%.

Deduction remained at 100%.

Deduction remained at 100%.

Deduction increased to 100%.

 

Frequently Asked Questions About Section 179 Bonus Depreciation

How Do I Calculate My Section 179 Tax Savings?

Want to quickly see how much your deductions stack up? Try the tax savings estimate calculator on Beacon Funding’s new mobile app.

With Beacon’s app, you can calculate your Section 179 Deduction and see how much bonus depreciation your equipment financing could save you.

Download the app today on AppStore or on Google Play.

I purchased equipment in 2018 and 2019, is it too late to claim my Section 179 deduction?

Businesses often miss great tax-saving opportunities because they aren’t aware certain tax breaks exist.

If you acquired equipment in the last 3 years and didn’t take a Section 179 deduction, you may be eligible to receive money back with an amended return. If you think this happened to you, you can file an amended return for 2018 or 2019 if you forgot to claim a tax credit or deduction.

To claim a refund, file Form 1040X no more than three years from the date you filed your original tax return. To learn more about the pros and cons of filing an amended return, check out this useful article from the IRS. Talk to your accountant if submitting a 1040x Form is in your best interest.

How Can You Apply for Bonus Depreciation?

To file for bonus depreciation, you can use IRS’s Form 4562. This form can also be used for other types of depreciation and amortization.

We highly recommend reviewing the form’s instructions. Check your state to see if you apply before you begin any depreciation calculations.

What Are Other Ways Bonus Depreciation Helps Me?

One of the main benefits of bonus depreciation is it allows you to deduct an additional percentage of the cost of eligible equipment purchases the year you acquired it, rather than depreciating them over a few years.

Section 179 Savings

When you purchase a qualified asset and put it to use, you might be eligible to take a Section 179 deduction to reduce the purchase price itself.

You can take the additional 100% bonus depreciation of the remaining basis. The balance of the purchase is then depreciated with straight-line depreciation over a number of years.

Key Takeaways:

  • Bonus depreciation allows businesses to deduct the cost of eligible purchases the year they acquire them (rather than spreading the cost over time).
  • You can file for bonus depreciation with IRS Form 4562.
  • Check your state to see if you qualify for Bonus Depreciation.

Remember: Bonus depreciation benefits apply only to equipment purchases in the same calendar year. That means the sooner you plan ahead for equipment financing, the better chance of not only guaranteeing the equipment is available for purchase, but the more likely you’ll receive tax incentives before the year ends!

Carl Nadig

Carl Nadig

P: 847-258-9532 |  EContact Me

As a digital marketer, Carl collaborates with Beacon Funding industry experts to write informative content on the commercial truck and decorated apparel industries.