Congress has approved much needed improvements in Section 179 which allows companies, like yours, the ability to completely deduct the purchase cost of equipment the first year it is put into service. The new limits are:
Maximum 179 Deduction for 2016: $500,000
This means for qualifying equipment purchases of up to $500,000, your company can deduct 100% of the purchase price from its taxes the very first year it is put into service.
Further, this maximum will be increased annually, with the maximum tied to inflation, at $10,000 increments.
Bonus Depreciation; Maximum Qualifying Purchases: $2,000,000
Once you exceed the maximum deduction of $500,000, bonus depreciation kicks in at 50%, until you reach the maximum qualifying purchases of $2,000,000. For example, if you spend $1,000, ooo on new equipment, you can fully deduct the first $500,000, then deduct 50% of the remaining $500,000 for a total tax deduction the first year of $750,000. It then begins to phase out dollar for dollar until you reach $2,500,000, where it is then completely eliminated.
Bonus Depreciation will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.
Note: The section 179 deduction applies to NEW and USED equipment whereas the bonus depreciation is only available for NEW equipment.
What that means to the purchase price of a NEW, $30,000 forklift? Assuming your company is in the 35% tax bracket, your effective cost, after deducting the entire $30,000 from your taxes, is only $19,500!
With Section 179 in effect for the remainder of 2015 and all of 2016, and beyond, there’s never been a better time to invest in new forklifts for your facility.
Note: We always suggest you consult your accountant or tax professional before you utilize section 179 for tax savings. Not all companies are structured the same and your savings may vary.