Last year, I asked for a few things related to economics. First and foremost, I wished for rates to stop going up. I knew this was a tall order for the earlier parts of the year, but lately this seems more promising. I also wished for the supply chain to loosen up, and for most industries, it did exactly that. Oh, and I got the Jimi Hendrix album I mentioned too! 

So I’m pretty happy with my 2023 haul… now let’s get on with 2024.  

First up, I want a rate cut. Truthfully, I’d like a few cuts, but I’ll take even one. Inflation seems to be pulling back, so after two long years of rate increases and holds, a reversal is likely for the next year. Hopefully this is good news for companies who want to borrow more and grow but have been ultra-conservative about it due to rates.

Related, I want to see the “soft landing” that was talked about often. I heard this so much that it would have made the cover of the Sears Wish Book (am I dating myself? Probably not – all you Gen X’ers remember.) But yes, inflation getting tamed without a recession would be remarkable and a nice boost for the economy. 

Ok, that’s it on the financial front. Let’s talk about a new gadget or similar.  

I’d like to see AI get a little more definitive and perhaps even be a catalyst for the “next big thing”. While technology continues to amaze us, I feel we’ve gotten to a point where we’re a little “meh” on newer things. The last true societal game-changer was the smartphone, and we’re more than 15 years into that. So I’d like to see what’s next – maybe a wearable AI assistant or something similar? I could definitely see that happening, and I want one in my stocking! 

I was listening to the holiday playlist the other day… Can we get some newer holiday songs please? I know Mariah Carey has done an excellent job here, but aside from her, I find Bing Crosby, Andy Williams, and the rest of the old gang still dominate most playlists. Not that I don’t like those songs but something newer that catches on would be nice too. 

In closing, I always enjoy this time of year. Besides all the personal stuff, it’s usually pretty busy around here as companies make year-end purchases. If you’re looking for such and need equipment financing, you know where to go. You’ll get exactly what you need for the holidays, and no coal in your stocking either!

Still, despite everything, we’re resilient here in the USA, and businesses moved forward as best we could. In that true American business spirit, many companies made shifts to better position themselves in this “new normal”. 2021 is going to be better for us all. 

One thing that’s comforting is the Section 179 deduction is still here, and it’s still quite large ($1,040,000). And better still, like I’ve mentioned a few times in this blog, it is unaffected by any other programs you may have utilized in 2020 (for example, if you got a PPP loan, you can still take your full Section 179 deduction).   

The only caveat is you must purchase the eligible equipment, and put it into service, by midnight 12/31/2020. So you still have some time.

In fact, I was thinking about the typical “end of the year” purchases,  and how much you can save in one day’s work. We get all kinds of inquiries for Section 179 financing this time of year, as businesses look to get that big purchase in before the year ends. 

For an example, let’s say you buy / finance a $100,000 piece of equipment on 12/30, and put it into service right away. Since you financed it, you are literally paying nothing for it in 2020. But you get to write off the entire $100k on your 2020 taxes, even though you technically only had it a day or two in 2020. At a 35% tax rate, you just saved $35k on your taxes. 

That’s 35,000 real dollars that stay in your bank account. If you didn’t buy the equipment, they’d be going to the IRS. So your bottom line is $35K larger. Not bad for a day’s work, huh?   

Section 179 is vital, and it’s available to you. Use it. 

Hey, have a great holiday everyone. Looking forward to a much better 2021 (maybe I’ll get a few good predictions in!)

And hopefully, you’re planning to use Section 179 for 2018. Because like all years, the Section 179 tax deduction will expire at midnight on 12/31. And for 2018 (and beyond), the deduction is a cool one million dollars.

The expanded limits (thanks to 2017’s Tax Cut and Jobs Act) really helps small businesses. And the fact that Section 179 is going to be here year after year helps as well – it essentially assures that you can continually buy (or finance) equipment, year after year, and take the full price of the equipment as a deduction.

At the risk of sounding too self-congratulatory, the above is a bit profound, because Section 179 is changing the way many small and medium companies operate. It makes buying equipment easy, and far more affordable, and means they can upgrade equipment faster. Many companies are planning on buying yearly equipment for as long as this ride lasts. I don’t blame them.

This has a circular effect, because when a company upgrades equipment, the “replaced” machinery typically goes into the used equipment market. This influx of good used equipment helps smaller companies just starting out. I see it all the time – a three-year-old tree removal company that’s mildly profitable makes a big jump and finances a used crane and a second bucket truck, instantly increasing their service level tenfold. That’s how you grow.

The really neat part is the equipment gets to take the Section 179 deduction multiple times. The company that originally bought the equipment takes the deduction when they buy it, and when they sell it, the new owner also takes a Section 179 deduction on the same piece of equipment (albeit at the used price, of course).

So here’s your reminder – you have until midnight December 31st to buy (or finance) equipment, and get it into service (getting a vehicle registered, installing the machine and turning it on, etc.) Then you can take your Section 179 deduction for 2018.

Happy shopping, and we’ll see you in 2019.

In fact, “time” is why I am posting this. Because hey, not all is lost. Section 179 is still a robust $25,000 deduction. If you buy equipment, it’s a no-brainer to use it. In fact, most small to medium businesses never hit that number in any given year, so for many of you reading this, the limit is immaterial – you’ll simply take a deduction on what you buy, up to the allotted $25,000.

But for those of you who haven’t yet made that equipment purchase, let’s not let this $25,000 go to waste. You should definitely make plans to take advantage of it. Ok, maybe you don’t buy that half million dollar piece you had your eye on – it’s still advantageous to buy a few new computers or office equipment or office furniture or a new business vehicle. Because if you don’t use it, you lose it – that’s a free 25k sitting there. It’s bad business to let it go to waste.

Further on the “good news” front, there’s always a chance that any increase to Section 179 is made retroactive. Now, this doesn’t mean you go on a spending spree because “Fletch said”, but if you are already over the limit and a bit worried it won’t be raised, I say relax. And put that new equipment you already bought to good use.

Brighter Section 179 days are around the corner – bank on it!

Actually, it goes one better than that – you have to have the equipment installed / put into use by then. So just “buying” the equipment isn’t enough – it has to be operational. This means (for example) a New Year’s Eve purchase of a new storage building with a Jan 2 delivery date won’t count. You need to get them to deliver it and get it ready to go by the stroke of 12.

In re-reading the above, it almost sounds like a harsh deadline – e.g., “do it by the stroke of midnight”. But really, it’s fair – we’ve had all year to take advantage of Section 179 and the higher rates 2012 offers. It’s just we’re nearing the end of the year, and time is running out.

So why is this year so important? Well, because Section 179 seems to be shrinking. A few years ago, we were enjoying fat deductions of 500k. But this year, the maximum allowable deduction is only $125k. That’s a large drop, isn’t it?

But if you think that’s bad, wait until next year, when it drops to a mere $25k. Ouch. And while I’m always hopeful for a midyear boost (which HAS happened before), the past few years of “shrinking” suggest perhaps the government isn’t comfortable with really high deductions for new equipment purchases.

So to take real advantage of Section 179, get in NOW. Unless, of course, you think the world is ending on 12/21/2012. If you think that, I would say “don’t bother”, and instead spend the money on a huge party. And make sure you invite me.