Great News! Section 179 Signed into Law

Great News! Section 179 Signed into Law
Applies to 2015, if Delivered this Year

Under current legislation, the bonus depreciation is extended through 2019. This allows businesses to apply a 50 percent bonus depreciation to any equipment bought during and delivered this fiscal year.  This applies to capital leases and can also be passed in TRAC and specific operating leases by the lessor.

For example, 50 percent of any equipment delivered on or before Dec. 31, 2015, can be depreciated on a company’s 2015 taxes, with the rest depreciated over the remaining useful life of the equipment.

The current bill allows the full 50% for property placed in service during 2015, 2016 and 2017, then phases down to 40 percent in 2018 and 30 percent in 2019, according to an analysis by John McClelland with the American Rental Association (ARA).

There’s better news on the Section 179 front. The Section 179 cap, which was reduced to $25,000 for fiscal 2015, not only went back up to the $500,000 cap in effect from 2010 to 2014.

Section 179 will be permanent at the $500,000 level. Businesses exceeding a total of $2 million 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.

This section of the tax code, according to the section179.org website, allows businesses to deduct from its gross income the full purchase price of qualifying equipment bought during a tax year, instead of depreciating it over time. If you exceed a total of $2 million in annual qualifying equipment purchases, there’s a dollar-for-dollar phase out of the depreciation until it’s completely eliminated above the $2.5 million level.

Here is a summary from the Congressional Ways and Means Committee “Protecting Americans from Tax Hikes Act of 2015:”
(See Section 143 on Bonus Depreciation and Section 124.  There
are many other tax incentives in the summary).

http://waysandmeans.house.gov/wp-content/uploads/2015/12/SECTION-BY-SECTION-SUMMARY-OF-THE-PROPOSED-PATH-ACT.pdf

 

As Published in Leasing News 12/21/2015

Construction equipment financing

Should I get equipment financing?

Depending on your industry, you may need to regularly purchase equipment for your business. This can get expensive. And for most of us, dropping a bunch of cash at once isn’t really practical. These days, more small business owners than ever are faced with the question “Should I get equipment financing?”.

Lacking a “war chest” of cash and considering equipment financing and leasing is a dilemma faced by both new business owners and seasoned veterans. That’s why many smart business owners turn to equipment financing and leasing to get the tools and machinery they need.

While this strategy is helpful when your cash flow is tight, it can also have many other not-so-obvious benefits. Just be sure your business credit scores are up to snuff before applying to help your chances of getting approved at the best rates. Approvals are typically based on credit scores, collateral, company financials and equipment value.

Without further ado, let’s review the different ways equipment financing and leasing can help your business grow:

  • You can get full financing. When you get a loan to purchase equipment for your business, most lenders will give you funds to cover the entire price. This means no down payment, so you won’t have to initially pay anything out of pocket.
  • Capital can be preserved. The availability of 100% financing allows your business to preserve more capital. Depending on how long you’ve been operating, you may have a sizeable cash reserve. But that doesn’t mean you should put it all into one investment at once. Because you can pay down the equipment purchase over time, you’ll have more money free to invest in other ways.
  • Testing before purchase. If you lease equipment, not only will you preserve capital, but also get the opportunity to test it out before committing money into equipment that may not provide the return you expect.
  • You get access to cutting-edge equipment. When the latest technologies hit the market, a business may be put in a position to sink or swim. Without the newest devices, your company may not be as competitive, but purchasing innovative equipment each time it becomes available is not a feasible option. With financing and leasing, you can get cutting-edge technology now without straining your business budget.
  • You reduce your obsolescence risk. If the equipment you’re leasing becomes obsolete, your lessor bears this risk. You won’t be responsible for any updates, disposals or replacements. This can be especially beneficial if your business needs equipment that tends to be quickly updated with better capabilities.
  • Helpful for your balance sheet and taxes. When you lease equipment, it is listed as a business expense rather than a long-term debt. This way you’ll have fewer outstanding debts that could impact your ability to obtain additional financing in the future. Plus, the IRS allows for lease payment to be fully deductible as long as your business uses the equipment.
  • Business credit stays healthy. It’s important to keep your business credit healthy…and available. Accessing capital for expansion, staffing and other operational expenses demands solid credit, and having an open business credit line allows you to respond immediately in a time of need. Leasing allows you to keep your business credit line open.

When it comes to answering the question “Should I get equipment financing or lease equipment”, every business will have their own specific considerations, and way of doing things. It’s up to you to decide what makes the most sense for you.