Section 179 explained
Essentially, this section of the IRS tax code lets businesses deduct purchase prices of equipment and/or software during the tax year. Tax codes can get complicated and messy, but this one is pretty straight forward. If you purchase or finance equipment during 2019, you can deduct the full purchase price from your gross income. Section 179 really invites businesses to invest in themselves with larger purchases such as packaging equipment.
The Tax Cuts and Jobs Acts has increased the deduction limit for Section 170 to $1,000,000 for 2019 and beyond. The 100% bonus depreciation is made retroactive to September 27th, 2017 and good through December, 31 2022. If your company is eligible, it's important to create your own tax break in 2019.
Qualifying for the equipment tax break in 2019
Under section 179, businesses spending less that $2,500,000 a year on qualified equipment may write off up to $1,000,000 up front. Think of the tax savings your business gets by simply investing in yourself. Yes, it can be an expensive investment in the beginning but packaging equipment has proven to give you a positive ROI in just one year.
If you happen to purchase more than $2,500,000 in one year, the million dollar deduction phases out. This is a dollar to dollar basis that goes out until the full $1,000,000 is spent. So if you reach $3,500,000 in equipment purchases this year, the deduction is gone. If you've been thinking of investing in packaging equipment, Section 179 gives you more of an incentive to purchase this year. Instead of waiting like in years past, you'll get to write off a huge amount of equipment purchases now.
A snapshot of the Section 179 tax deduction
Bullet points for saving on packaging equipment
- Section 179 deduction limit: $1,000,000
- 100% bonus depreciation
- Limit on qualified purchases: $2,500,000
More resources on packaging equipment:
- Benefits of packaging equipment and automation
- Packaging automation guide (download available)
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