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Sec.179 and Bonus Depreciation-The Proper Lease Structure Will Save You $$$

With the passage and signing into law of H.R. 1, aka, The Tax Cuts and Jobs Act, the deduction limit for Section 179 increases from $500K to $1M for 2018 and beyond.  The limit on equipment purchases likewise has increased, from $2M to $2.5M.  In addition, the deduction now includes any of the following improvements to existing nonresidential property (i.e.the improvement must be placed in service after the date the property itself was first placed in service): roofs, heating, air-conditioning, and ventilation systems;fire protection, alarms and security systems.

 

  • Depreciation

Bonus depreciation: The act extended and modified bonus depreciation under Sec. 168(k), allowing businesses to immediately deduct 100% of the cost of eligible property in the year it is placed in service, through 2022.

The act also removed the rule that made bonus depreciation available only for new property.

Sec. 179 expensing: The act increased the maximum amount a taxpayer may expense under Sec. 179 to $1 million and increased the phaseout threshold to $2.5 million. These amounts will be indexed for inflation after 2018.

The act also expanded the definition of Sec. 179 property to include certain depreciable tangible personal property used predominantly to furnish lodging or in connection with furnishing lodging.

  • ***Important Update*** Section 179 Qualified Financing

Using Section 179 with an Equipment Lease or Equipment Finance Agreement might be the most profitable decision you make this year.

Why? Because the amount you deduct will almost always exceed your cash outlay for the year when you combine (i) a properly structured Equipment Lease or Equipment Finance Agreement with (ii) a full Section 179 deduction. It is a bottom-line enhancing tool (plus, you get the new equipment and software you’re adding to your business).

Also, the ‘$179 Bonus per $10,000 Financed’ is available for a limited time during the 2018 year. This means that you (a) get your equipment, vehicles, and/or software now, (b) get to take full advantage of the Section 179 deduction in 2018, and (c) get Section 179 Bonus Cash as well.

  • Leasing & Section 179

Did you know that your company can lease equipment and still take full advantage of the Section 179 deduction? In fact, leasing equipment and/or software with the Section 179 deduction is a preferred financial strategy for many businesses, as it can significantly help with not only cash flow, but with profits as well.

  • Equipment & Software Leasing – Non-Tax | Capital Leases

The main benefit of a non-tax capital lease is that you can still take full advantage of the Section 179 Deduction, yet make smaller payments. With a non-tax capital lease you can acquire and write-off up to the deduction limit worth of equipment this year, without actually spending that amount this year.

In other words, a small business that is managing cash flow can leverage a non-tax capital lease to minimize out-of-pocket cash, and still take the full Section 179 Deduction.

Examples of non-tax capital leases include a ‘$1 Buyout Lease’ and a ‘10% Purchase Upon Termination (PUT) Lease’. In many cases, the amount you save in taxes will be MORE than the total of your first year’s payments.

Cardinal Business Financing, Inc. are experts in creating financing packages that will increase your cash flow and provide a greater ROI.  We will work with your CPA to make sure the program we offer works in your business.