This video was made by Amanda Haraden. As a Senior Financing Consultant at Beacon Funding, Amanda works with businesses to help define their goals and help meet their needs.
Learn more about Section 179 benefits and tax savings: www.beaconfunding.com/taxsavings
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Why is Equipment Financing Important for Your Tax Savings? Section 179 deduction explained.
Tax season is arriving sooner than you might believe. As the end of the calendar year gets closer, it’s important to think about your tax write-offs for your 2021 return.
What many businesses don’t know is that you can qualify for a deduction just for financing qualified equipment. Yes, by using Section 179, you are not only saving your business money, you are also reducing the cost of the equipment you are purchasing for your business.
Here’s how it works: First make sure you finance, lease, or purchase equipment in 2021. Then take a Section 179 deduction on your 2021 tax return to keep more cash in your business.
By taking this deduction the same year you acquire equipment, you are eligible to receive a larger deduction with an Section 179 tax benefit.
What is Section 179?
Section 179 is a tax break offered by the U.S. government that rewards growing businesses.
Breaking Down the Numbers of a Section 179 Deduction
Write off 100% of the purchase price. Section 179 allows a business to deduct all or part of the purchase price during that same tax year of an equipment purchase.
Rather than deducting smaller portions of the equipment cost over several tax years, you can receive it in one. This can significantly reduce your taxable income and effectively lowers your tax bill for the year you purchased your equipment.
Normal Depreciation vs. Section 179
Let’s walk through a simple example.
Imagine you purchase a piece of equipment for $50,000. There are two ways you can deduct your equipment’s purchase cost.
- Normal Depreciation. Normally, you would write off a portion of the equipment’s cost each year, spreading your tax benefits in small increments during that equipment’s “useful life.”
Then, let’s say you use that piece of equipment for five years. In this example, that would mean a $10,000 deduction each year for five years.
- Section 179. Instead of writing off the equipment’s cost over multiple years, you would deduct the entire $50,000 in the same year you purchased it.
While deducting a little at a time can be beneficial, many businesses prefer to receive total tax benefits upfront. Unlike other depreciation methods, Section 179 helps accelerate tax deductions and receive them immediately.
Requirements for Section 179
To be eligible to use Section 179 benefits, there are a few conditions you should be aware of.
Equipment must be purchased and in use before December 31st
Start the process sooner than later. It might take some time for your equipment to get to you. It’s best to plan ahead.
Make sure there’s enough time for you to use your equipment before the calendar year ends. Don’t risk the equipment you want not being available, built, or delivered on time.
Both new and used equipment qualifies. Everything from heavy-duty equipment, business vehicles, office furniture computer, and off-the-shelf software may be eligible.
As with any tax-related questions, consult your CPA before purchasing to determine if the equipment you want qualifies for the Section 179 tax deduction.
Equipment needs to be used for business 50% of the time
Put your equipment in operation before the deadline. Remember to have the equipment in your possession before the December 31st deadline.
The sooner you get your equipment, the more likely you can use this tax benefit to keep cash in your business.
Calculate Your Potential Section 179 Tax Savings
Wondering what amount of tax savings you can expect from purchasing equipment? Beacon Funding has a tax savings calculator just for you.
It’s easy. Simply enter the cost of your equipment and get an estimate on your tax savings. Your business could save thousands of dollars just for purchasing and using it before the year ends.
Want to calculate your tax savings on the go? Download the calculator from Google Play or the App Store today.
Be Sure to Get Professional Advice
As always, make sure to consult with your certified public accountant (CPA) or tax advisor before any equipment purchases. That way, you can discuss what is best for your business.
To learn more about the benefits and tax savings available to you, visit www.beaconfunding.com/taxsavings