1 million dollars
Hopefully you read that in your best Austin Powers voice. That's because the equipment tax incentive for 2018 is increasing. Up from a $500,000 deduction in 2017, this years tax deduction doubles to $1,000,000. It feels good to type out all of those zeroes and they'll help your bottom line and giving you incentive to make 2018 the year to purchase automatic packaging equipment... mmm savings.
How the equipment tax incentive works
The Section 179 Deduction works as an incentive to purchase packaging equipment this year. The deduction is good on new and used equipment, and off the shelf software. In order for a company to take advantage of this tax break for 2018, the equipment has to be financed/purchased and put into service between September 27, 2017 to December 31, 2022.
The maximum amount you can spend on equipment to qualify for the deduction is $2,500,000. Once you reach that limit, you won't qualify for more deductions.
How about a bonus? The bonus depreciation for 2018 is now 100%. This is usually taken after the spending cap on equipment has been reached. This bonus is still available for new and used equipment. Bonus Depreciation is useful for large businesses spending more than the spending cap on new automatic packaging equipment. Now's your chance to purchase packaging equipment this year and optimize your packaging operations.
Automatic equipment tax incentive example
A company spends $600,000 on equipment in 2018. Under the 2018 deduction, they'll take off the full amount of their automatic packaging equipment purchases. They're allowed to spend up to 1 million dollars in equipment purchases. The total deduction for this company in the example would be $600,000.
After they're marginal tax rate (assuming 35% bracket), the equipment will only cost them $390,000 for the year. That's a huge savings, and think of all the equipment they could have purchased this year to reach the spending cap. If you're thinking of installing packaging equipment for your operations, there's never been a better time than 2018. It's never been this high, and the tax deduction changes every year so it could go down in 2019.
2018 equipment tax incentive overview:
Deduction limit: $1,000,000
Spending cap on equipment purchases: $2,500,000
Bonus depreciation: 100%
- Section179.org: More information on the equipment tax incentive for 2018
- Equipment Tax Incentive Calculator
- Automatic Packaging Equipment (with free equipment brochure download)
- Shop Packaging Equipment
- Stretch Film Equipment
- Tape Machines
- Strapping Equipment
*Editors note. This post was originally published on January 25, 2018 and has been updated with the most up to date content.