Now, all year I’ve been harping on the effect supply chain delays will have on Section 179 and its “midnight 12/31” deadline. As it stands, there are definitely items you will not get by the deadline. So let’s instead focus on what you CAN do.

Here are three “no supply chain issue” ways you can use Section 179 for 2021, even at this late hour:

1. Buy (or Finance) Eligible Software

A Section 179 deduction can be taken for common “off the shelf” software (this means non-custom, non-modified software). But in 2021, “off the shelf” means downloadable, SAAS, etc. This can include ERP systems, CRM software, and more. As always, ask your tax professional, but it’s a good bet that the software you need is eligible, and you can have it purchased and running in an hour. 

2. Buy (or Finance) Used Equipment

Used / preowned equipment doesn’t need to be manufactured. In many cases, it doesn’t have far to be delivered. There’s a good chance you can wake up Thursday Dec 30^th, and decide “I need that used widget I saw for sale a few miles away”. If you want Section 179 Financing for the used equipment, you contact us, and we get you approved that same day. You get the equipment Friday the 31st, start it up, and even do a small job with it that afternoon. And you then get your Section 179 deduction for 2021. How cool is that? 

3. Hit the Store

We’re not talking huge dollar amounts here, but you could do worse than hitting a retailer or two and loading up a few carts with eligible items your business needs (most tangible equipment your business needs will qualify for the tax deduction.) No waiting, no muss, no fuss. 

There you go – three ways you can still use Section 179 and not worry about supply chain issues.

Have a great holiday everyone – we’ll see you in 2022.

Even though I’m quite schooled on the advantages of leasing equipment and I’ve spoken about it in this blog previously, I never really expressed just how flexible it is, and how it could help companies of any size, no matter their goals.

I also never really got into the accounting principles of leasing, and how the different types of accounting look at leasing. This is actually an important part of the leasing equation, and we should discuss it.

So let’s start a new series on leasing. In the weeks that follow, we’ll discuss:

• The Two Different Accounting Principles – Book Accounting and Tax Accounting.

• How the Two Accounting Principles View Leasing.

• The Advantages of Leasing – Taxes and Balance Sheets.

• Types of Leases and How They Help Companies.

We’ll dive deeper into these topics, but for now, I’m going to give a very big-picture overview: There are generally two main ways a lease can be viewed in an accounting sense – depending on the type of lease, either the leased equipment is seen as “owned” by the company in a tax and balance sheet sense, or it isn’t. 

There are advantages to both ways, depending on a company’s size and goals. Some companies (usually smaller businesses) want the tax advantages of ownership, including claiming a Section 179 deduction. So they will choose a lease structure that offers that.

A larger company may prefer to keep the leased equipment off the balance sheet, and have it viewed almost akin to a “rental”. They cannot claim a tax deduction or depreciation of course, but they can also treat the equipment as an expense, which has its own set of advantages (for example, expenses may not need board approval, where capital expenditures may). 

The bottom line is, leasing is incredibly versatile for businesses, and can be an excellent tool in aiding a company’s growth. Stay tuned for more on this interesting topic. 

I talk about this every year, because I get really excited about it. We’re in that time of year where it’s actually profitable to finance equipment and take the Section 179 Deduction. Here’s what I mean:

You buy equipment and finance it with us. Let’s say it’s $50k. 

You take the full $50k as a Section 179 Deduction.

At a 35% tax rate, that $50k deduction translates into $17,500 saved on your taxes. These are actual dollars that stay in your account instead of going to the IRS. In other words, if you *didn’t* buy the equipment, you’d be paying the IRS $17,500 more.

So ok, you have an extra $17,500 in your account. And since you financed the equipment, you’re only making a payment or two for the rest of 2020. Let’s say those two payments total $2,400. If we subtract that from the $17,500, we get $15,100.

So the bottom line is this: in 2020, you A) got a new (or new to you) piece of equipment you needed, and B) have an extra $15k in your bank account for doing so. 

All of a sudden, 2020 is looking better and better, huh?

You can look at Section 179 a few ways. Had you paid cash for the equipment, you’ll still get the $17,500, but you laid out the full $50k. You can look at the $17,500 as a discount (meaning you really only paid $32,500 for the equipment).  

But in my example here, by financing the equipment, you actually have $15k MORE in your bank account than if you did nothing. And you know what? That $15k will probably cover all of next year’s payments too. And, of course, in all this time of the payments being covered, you are using the equipment to grow your business. 

When finance guys talk about “leverage”, they typically mean things like this.

So yes, you too can end 2020 on a great note. Get something you need. Finance it. Then take that sweet Section 179 Deduction (you can deduct up to $1,040,000 for 2020 – that’s a million, forty thousand.) Just make sure you have the equipment installed and in service by midnight, 12/31/2020.

Happy shopping!  

Here we are, well into September, and we’re staring the fourth quarter of 2018 right in the face. And now that the third quarter is coming to a close, where are you on your Section 179 spending?

To be honest, there is no good reason to not be completely bullish on Section 179 as we cruise through September. In fact, I can think of (literally) a million reasons why you should be taking full advantage of it. That’s because, as you likely know, Section 179 is a cool million dollars for 2018. That’s a number that can really make a difference for companies. I’m not saying you need to go buy a million dollars’ worth of equipment to make it all work, but the fact is, most small and medium businesses can buy as much as they like, and not worry about hitting a limit. That’s pretty reassuring.

Here’s another reason. Right now, at the end of Q3 2018, the economy is humming along. It’s good business sense to use these “good times” to fortify your position, to update and improve your capabilities, and not only keep up with the Jones’, but surpass them. If you’re thinking of being bold, you have a robust Section 179 to back you up.

Two more reasons, both related to Section 179 equipment financing.

The first is the fact that if you finance equipment right now, you will almost undoubtedly reap a bigger tax savings for 2018 than the total of the payments you make in 2018. Yes, that means financing equipment at this time of year and taking the Section 179 deduction is actually an “in the black” move.

The second is interest rate hikes. One is imminent this month, and there is talk of another in December. If you haven’t already, you should get in before that happens. Not only do you get the benefits listed above, you also save money by locking in. Trust me, rates aren’t going down anytime soon, so solidify your position right now.

The 4th quarter is looking good folks. I’m optimistic.

Whew, that was some end to 2014, wasn’t it? But before we take a look at Section 179 for 2015, let’s recap 2014 a bit in regards to our favorite small business tax deduction.

For most of the year, Section 179 sat at a maximum deduction of $25,000. I posted about it several times, and even called my congressional representatives to get it raised, but sadly, either they were working too hard on other things (doubtful) or funding a project to study snails (more likely). But then in mid-December, Congress finally took action and passed the Tax Extenders Bill, raising Section 179 to $500,000. But they really waited until the last minute, doing such with two weeks left in the year. Yes, it was retroactive to Jan 1, 2014, but still, I’m betting that many businesses missed out because it came in so late. It’s hard to think about buying new equipment when you’re in the middle of the office holiday party.

So that was Section 179 in 2014. But now let’s look ahead and see what’s in store for Section 179 in 2015.

Well, sadly, the Tax Extenders bill doesn’t really extend all that much. Not for Section 179 anyway. In fact, as of Jan 1, 2015, Section 179 fell back to $25,000. This means as of today, Section 179 for 2015 has a maximum deduction of $25,000, and a $200,000 cap on equipment purchased. Like I said repeatedly last year, it’s always nice to have a 25k write off, but goodness, $500,000 is sooo much better.

What Congress (and the general public too) need to understand is that Section 179 is not just another business tax write-off. This isn’t a Wall-Street style bailout. This is a tax deduction so Mom and Pop America can invest in themselves. Even with a high deduction of $500,000, it phases out once $2,000,000 in equipment purchases is reached. Huge corporations probably spend two million a month on equipment, so this deduction isn’t for them. It’s for that business down the street buying a new sign. Or a delivery truck. Or a small manufacturer buying new machines. And so on. Section 179 benefits everyone – it benefits the business looking to invest in themselves, it benefits the manufacturer who sells equipment, it benefits the employees of both, it benefits the trucking company and drivers that deliver the equipment, it benefits the equipment financing companies who provide the funds, and so on. It’s a true stimulus for the little guy.

I’ll keep you abreast of Section 179 for 2015, posting every so often about it, whether there’s news about an increase or not. And I urge you to contact your congressperson – tell them less snails, and more Section 179 in 2015!

Twas a night in December
In an office on a hill
Where the executives all gathered
With their accountant named Bill

“Your taxes are too high”
Said Bill with a frown
We have nothing to claim
To bring the number down

“But what can we do?”
The executive VP did vent
Our profits were strong
And into the bank they went

We were told to curb expenses
So the old equipment we did use
Yes, it needed some duct tape
(that’s how Jim got that bruise)

“I have an idea”
said a voice from the right
The executives turned around
To see an intern bathed in light

We can replace the old equipment now
And here’s the part that’s divine
We can write the entire cost off
Thanks to Section 179

The executives all smiled
So wide they almost burst
But intern continued
“You need to act by December 31st“

The executives took action
A plan they did sketch
All because they listened
To an intern named Fletch

And that’s how I got my start. Ok, maybe the “bathed in light” part is a bit much. But it was a good poem, right? Have a great holiday, everyone. And remember, get those Section 179 equipment purchases in (and operational) by the deadline, which is midnight, 12/31.

See you in 2015!

I wish I had huge news that Section 179 got a sweet increase, but I don’t. So far, nothing has happened in regards to Section 179. The limits are still $25,000, plus an adjustment for inflation.

Now, let me tell you not to worry about it. My crystal ball says Section 179 will get attention sometime this year. Last year, it got added into the “fiscal cliff” bill in late winter/early spring. Another year, Section 179’s increase came in the fall. But one thing has remained very consistent over the years – businesses love Section 179, and the government has always found a way to increase it. So I’m very confident it’ll get some government love at some point this year.

In case you are new to all of this, Section 179 is the tax code that lets businesses write off business equipment. Almost all capital equipment, many vehicles, computers, office furnishings, and lots of other stuff, can be 100% written off as a tax deduction for the current year. This makes it very attractive to buy equipment in the current year.

Like I said, the $25,000 limit it’s at now will almost certainly get an increase. Last year, it was bumped to $500,000. Assuming you hit that number, and a 36% tax rate, that’s $180,000 right off your tax bill.  Just for buying equipment. Yes, thank you, Uncle Sam.

I have to be clear – I’m not working for the government, so I’m not 100% sure about an increase. Just 99% But, while that 1% says I could be wrong, I still say buy your equipment now. Because if you’re thinking about it, well, that means you need it. No time like now to make profits, right? And if this year is anything like the previous decade, Section 179 will get a nice little boost at some point.

(…on that note, this time of year always reminds me of my office supply store job I had years ago. You would think Dec 30/31 would be slow for a “business” type store, but it never was – in fact, we always had a crush of people buying computers, printers, cameras, office furniture… anything they could to take advantage of Section 179. I know I’ve mentioned that story before, but it’s worth repeating, because it illustrates that to qualify for the current year, your equipment must be purchased and put into use by midnight, 12/31.)

This year, the government actually did something good… they raised Section 179’s limits for 2013. In fact, it’s back up to a healthy $500,000. And this is good for new (or new-to-you) equipment. Considering that it was going to be a paltry $25,000, this amendment is very welcome indeed. But if you are reading these words, there’s little time left – it’s getting close to New Year’s Eve.

Here’s a quick rundown of the type of equipment that generally qualifies:

• Tangible equipment for general business use.
• Tangible personal property that is used in business (partial use qualifies as well. For example, Laptops that are also used for personal computing can be partially deducted.)
• Business Vehicles with a GVW (gross vehicle weight) that exceeds 6,000 lbs. (this means cargo vans, dump trucks, heavy machinery, etc.)
• Computers and “off-the-shelf” software (yay!!)
• Office Furniture and Office Machines (double yay – who doesn’t need a new desk chair?)
• “Installed” equipment that is attached to your property, but is not a structural part of the building (like a loading crane or similar).

There you go – you have a few days left, so hop to it!!

Have a great holiday, and I’ll see you next year.

Anyway, on its own, Section 179 absolutely rules. And on its own, financing equipment (or leasing equipment) is a wonderful thing as well. But combining the two together? It can make a ridiculously big difference on your year-end bottom line. Let me show you how.

We’ll assume a business that purchases $650,000 in equipment this year. Here are the Section 179 numbers below:

Not bad at all, huh? When all was said and done, they ended up by saving $212,400 in taxes. Those are real, net dollars added back into the company’s coffers.

Hold that “$212k net” thought for a second. Because the IRS is giving you that tax savings no matter how you purchased the equipment. So let’s assume you financed it – you put 100k down, and financed the rest. Then, your 2013 payments will total another 75k.

So you put $175,000 out of pocket in 2013 to buy this shiny new equipment.

But you got back 212k in tax savings (remember, those were real “net” dollars).

$212,400 – $175,000 = $37,400

That’s Thirty Seven Thousand Four Hundred Dollars added to your bottom line this year. PLUS you got all of the equipment right now. Looking at it from a 2013 point of view, it’s like somebody paid you to get new equipment – equipment that will hopefully be used to make more profit next year.

This almost makes “too much sense” for many companies. Like they ask “what’s the catch”? There is no catch – this is how Section 179 and Equipment Financing can work together. And like I said at the very top of this post, it’s a marriage made in heaven.

• I wish for a better 2013 in terms of the economy. Listen, I know things have been rough, and I know some people think we’re slowly recovering, but the fact is, for many companies, business is fairly stagnant. I really would like to see a better 2013 in an overall sense.
• Section 179 getting a boost in 2013 would be really nice. Right now, it’s sitting at $125,000 as the maximum amount you can deduct, and that’s going to fall to $25,000 in 2013 (so again, take note and buy now if you want to take advantage of it). I really hope our leaders see that $25,000 just isn’t going to cut it and give Section 179 a nice bump up in 2013. They’ve done it before.
• “Hey, your insightful Facebook post has made me change my political position” said no one ever. So I want politics to “stop”. I don’t mean just them – I mean “us”. I’m tired of every conversation (online and off) getting political, and everything becoming “left or right”. Wishful thinking, I know, but hey, it’s my wish list. If you notice, I lead by example here – I am decidedly un-political in this blog, and am more interested in financial / business issues than any particular party.
• I want the new Halo game. I’d buy it myself, but Mrs. Fletch puts the kibosh on buying this time of year. Hopefully Santa (or Mrs. Fletch – same thing) is listening.
• I want technology to keep moving forward. I’m excited about how things have progressed over the last few years, and I’m impressed with smartphones and their capabilities. I’d like to see things move further (an equipment financing / equipment leasing app? Be still, my beating heart!)
• Section 179 again – I wish everyone who reads this and is thinking about Section 179 to just go ahead and use it for 2012. Because despite my earlier wish, a boost for next year is not a given.

Hope you folks are enjoying the holiday season so far. It’s a great time of year.