Construction contractors will soon reap the benefits of hefty tax breaks set to kick in with the 2018 tax year. The updated tax provision, known as Section 179, allows contractors to deduct the full cost of new and used equipment (up to $1,000,000) in the first year they put the equipment into use including financed equipment. Bonus depreciation also increases to 100%. These new deduction limits to this tax law should have tremendous benefit for many companies, while boosting the economy.
For many contractors, this tax break, combined with the business growth they’re already enjoying, is enabling them to increase equipment purchases. And that’s the whole point: this is an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2018 tax return, up to $1,000,000, within a threshold of $2,500,000 for total equipment purchases.
Typically, businesses can write-off qualifying equipment, but only portions at a time based on their depreciation schedule. For example, if a company spent $100,000 on piece of equipment, they might write off $20,000 annually for five years. Most business owners would rather write off an equipment purchase all at once in the year they purchase and begin using it. With section 179, they can. Contractors should always consult with their tax advisor for advice prior to making purchase decisions.
How much could you save using Section 179 on your new or used heavy equipment purchase? Find out here.