As we approach the year-end, this is the right time to think about whether you need to buy new equipment for your business. The Section 179 tax deduction can help make new machine purchases much more cost-effective.
The Section 179 tax deduction enables you to save thousands of dollars on business equipment purchases. But to benefit during this tax year, you should buy and put eligible assets in service by December 31st. If you combine this deduction with a financing option, its value increases further, providing significant savings and elevating your year-end profitability.
What is Section 179?
Section 179 is an expense deduction policy that allows businesses to deduct the whole cost of new equipment in the tax year it is placed into service – including equipment, machinery, appliances, furniture, and computers. ‘Placed into service’ means your vending machines and other equipment are ready and available for business purposes.
For instance, computers purchased during the end of the year 2021 but are not ready for use till the beginning of 2022 must be claimed as a Section 179 deduction on your tax return for 2022. For some businesses, this is a desirable alternative to depreciating assets or outdated technology.
Vending Equipment – relevant icon next to the text – Text ‘Yes’ next to the icon
Computer Hardware – relevant icon next to the text – Text ‘Yes’ next to the icon
Networking Equipment – relevant icon next to the text – Text ‘Yes’ next to the icon
Software – relevant icon next to the text – Text ‘Yes’ next to the icon
Used for Profit – relevant icon next to the text – Text ‘Yes’ next to the icon
Financed Purchases – relevant icon next to the text – Text ‘Yes’ next to the icon
Less than $1,050,000 – relevant icon next to the text – Text ‘Yes’ next to the icon
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Property is ineligible if it is:
- Obtained by inheritance, gift, or trade
- Used for business for less than 50% total use
- Held by a trust or an estate
- Procured from a relative
- Used by foreigners
- Outside the US
- Used by government or non-profit entities
Who Can Use the Section 179 Deduction?
Any US-based business (except non-profit organizations) can gain advantage from Section 179. However, the mentioned spending cap and dollar limit make this deduction suited for small and mid-size businesses. The expenditure for business equipment should not exceed $3.6 million, to be eligible for Section 179.
Can You Finance These Purchases?
Yes, the Section 179 deduction applies to qualifying purchases you purchase, finance, or lease. When you finance or lease equipment, you can deduct the whole price of the business equipment in its first year, before being paid off. This can be a massive boost to your business’s profitability for the particular year.
This is how some businesses approach this plan: They finance their equipment during the year-end according to their year-end planning. They put it into service before the year-end. Then, they deduct the entire purchase price of their equipment from their taxes up to $1.08 million. This approach generates larger tax savings than their payments during the year.
To make the deal even better, finance companies sometimes offer no payments for the initial 90 to 120 days for eligible buyers. Section 179 is a tax incentive that motivates small businesses to buy equipment and invest in themselves.
To make every dollar count, it is important for you to have a clear strategy that identifies your business goals and how financing new equipment can help you meet them. Financing vending equipment is a great way to start generating revenue without the necessary capital to pay for the entire machine(s).
Final Words: Learn More About Tax-Savings Strategies and Lead Times
One vital consideration for Section 179 is that your vending machines and other business equipment must be both bought and put into service before claiming the deduction. You should know that long lead times are forecasted into 2023. So, you should get a head start on determining your requirements and placing your orders.
Consider how your business needs expansion, its goals, and reach out to U-Select-It to see how we can help you meet your goals for 2023. Now you know that the Section 179 deduction is a powerful tool available for businesses to help them save on property purchases and equipment costs. Hurry and make the best use of this deduction for your vending machines and other equipment purchases.
We recommend chatting with your tax accountant to learn more about the Section 179 Tax Deduction. The U-Select-It team is here to answer your questions about vending and share why our equipment provides the lowest cost of ownership in the industry. Call us at 1-800-247-8709 today!