Financing l Section 179 Information

Section 179/Bonus Depreciation for Current 2017 Tax Year

Section 179 SavingsSection 179/Bonus Depreciation can provide you with significant tax relief for the 2017 tax year, but new and used equipment must be in place by midnight December 31, 2017 to reap the benefits.

Section 179 - Section 179 is $510,000 for new and used equipment purchases.  Businesses exceeding a total of $2,030,000 of purchases in qualifying equipment will have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million.  Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.

Leasing equipment and software while leveraging Section 179 can help increase your cash flow as well as your profits.  You take full advantage of Section 179 and make smaller payments, leaving more cash in the business.  One big advantage is that you can write off $510,000 worth of equipment without actually spending that much during the year if you use a non-tax capital lease.

50% Bonus Depreciation -  Businesses of all sizes can depreciate 50% of the cost of acquired equipment as long as it's placed in service during 2017.  Then bonus depreciation will phase down to 40% in 2018 and 30% in 2019.  Unlike Section 179, it applies only to new equipment, and there is no cap on the amount that can be depreciated under this provision.

50% Bonus Depreciation/Section 179 Savings Example


Company X purchases new equipment totaling $1,000,000.  Under the law, Company X can write off $789,300 or 79% of the new equipment in the first year by using 50% bonus depreciation, Section 179, and regular depreciation.  Based on a 35% tax bracket you would save $281,400 in the first year.
 

$1,000,000 NEW Equipment

2017 
Sec. 179 Deduction$510,000
Plus 50% Bonus Depreciation on remaining basis ($500,000)$245,000
Plus 14% on 1st year basis ($245,000)$34,300
 $789,300 write-off in 1st year

Let’s take a look at Company X if they purchase used equipment worth $1,000,000.  Under the increased Section 179 limits, Company X can write off $544,300 or 54% of the used equipment in the first year.  Based on a 35% tax bracket you would save $190,505 in the first year.
 

$1,000,000 USED Equipment

2017 
Sec. 179 Deduction$510,000
Plus 14% on 1st year basis ($245,000)$34,300
 $544,300 write-off in 1st year

For questions, contact Ken Pfad at 847.490.7902 or kenp@sysfin.com.


*Examples assume a 7-year asset depreciation class
**Examples are for demonstration purposes only and you must consult your tax professional for actual savings

 

- This is not legal, tax or financial advice. You should consult with your tax advisor for the specific impact to your business. -

 
Copyright Machinery Systems, Inc. 2016. 847.882.8085. email: msi@machsys.com