When the clock strikes midnight on 12/31/2019, that’s it – Section 179 for 2019 is done. Over. Finished. 

And you don’t want to miss it. Trust me on this – here’s why:

The US Government has given small and medium businesses a HUGE gift with Section 179. It allows you to deduct the entire purchase price of almost all equipment purchases, up to a million dollars.

In other words, if you buy a new machine, or a delivery truck, or almost anything else used in business, you can deduct the entire cost from your 2019 taxes. Depending upon your tax rate, that’s like getting an instant 25%-35% discount on your purchase. That’s sweet. Want to see how much you can save? Check out this Section 179 Calculator.

Section 179 Financing Makes it Even Sweeter

Even better is when you finance your purchase. Because this does two things:

First, it gives you the funds to buy the equipment now and take advantage of Section 179. We have but a few weeks left in 2019, and financing the equipment allows you to get it before the 12/31 deadline.

Second, the money you save on your taxes (again, depending on your rate, it’s like you instantly get 25-35% of the purchase price as raw, keep-able dollars) will FAR EXCEED the payments you make. This can make 2019’s profit number soar, and also have a profound effect on 2020’s bottom line as well.

We have customers who finance a few items, and the money they save on their taxes covers their payments for as many as 18-24 months. That’s like getting the equipment for free for a year or two.  Plus, you are using the equipment to further increase your revenues, right? So that’s even more advantageous to your bottom line.

I know I chirp about Section 179 a lot, but seriously, it’s such a big deal that it astounds me when businesses do not take advantage of it every single year.  Make sure you’re not left out, and if I can help in any way, let me know! 

But sometimes, I get frustrated with how Section 179 is often presented. I’m a plain-language guy, and once something starts to sound too much like an advanced-level economics course, most people (including myself) tend to tune out.

So when I see Section 179 called an “accelerated depreciation schedule” like I did the other day, it makes me roll my eyes. 

Ok, technically, that’s what it is, because under “non-Section 179” circumstances, you depreciate a piece of equipment yearly until the value reaches zero. Section 179 lets you depreciate (aka write off) the entire purchase price right now. 

But calling it an “accelerated depreciation schedule” sounds like the title of a school assignment that you put off until the last minute. Can’t we find a better way to think about it?

Here’s how I like to present Section 179: It’s a discount on your purchase. 

Because you write off the entire purchase price as a deduction, the discount equals whatever your tax rate is. We can conservatively say 24%. But it can be 32% or even 37% – again, whatever your tax rate is, that’s your discount.

If you buy a 100k piece of equipment, you write off 100k on your taxes. At (say) a 24% rate, that means you save a cool 24k on your taxes.  These are real dollars that you get to keep (that you would have otherwise paid), so it’s exactly like getting a 24% discount.

Imagine this. You need a new widget. The new widget will greatly help your business. So you go to the widget-maker and negotiate a great price on a new widget. Then the widget-maker says “buy it now, and you’ll get another 24% off”.

You’d jump at that, wouldn’t you?

That’s Section 179 right there. It expires for 2019 on 12/31, meaning you have roughly two more months of it this year, so take advantage.

It means that if you finance equipment and take the Section 179 deduction, you will likely save MORE in taxes than you will pay out in monthly payments for the rest of 2019.

In other words, say you bought a piece of equipment for $65,000, financed it, and took your Section 179 deduction. Using this handy dandy Section 179 Calculator, we see that your tax savings is $22,750 in raw dollars. 

Your monthly payment will vary by loan length of course, but let’s assume a payment of $1,250 a month.  Depending on when you buy it this summer, you will probably make 4-5 payments this year. So, at that payment, you’ll pay out $6,250 tops. 

So you financed equipment, saved $22,750 on your taxes, and paid out $6,250 in finance payments for 2019. $22,750 minus $6,250 equals $16,500.

That’s how much larger your bank account is because you financed equipment and used the Section 179 deduction.

This isn’t fantasy. This is very, very real. If you did NOTHING AT ALL, your 2019 bank account would be $16,500 less.

But instead, you financed equipment.  And got to use it (which hopefully increased your productivity and revenues.) And because you bought and used it, your bank account is $16,500 larger than it would have been otherwise.

I cannot stress enough how powerful this can be for your business. And not only because it works in your favor in raw dollars for the current year. It’s also the fact that you get the equipment, and get to use it, without it costing you a dollar for a long, long time. 

In other words, you saved $22,750 in taxes. Until you make $22,750 in payments, you didn’t actually reach into your pocket for the equipment. That’s approximately 18 months at our example payment of $1,250. And in that 18 months, that new equipment enhanced your business and your revenues. 
I talk about Section 179 financing a lot in this blog, and hopefully, you can clearly see why. Smart businesses do this every year, due to the details outlined here. Section 179 and equipment financing is simply that good. Use it.

• 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.

So, being that it’s Tax Day, let’s expand on that last point and discuss Section 179.

Tax Day is the perfect day to discuss this, because Section 179 can really make your 2011 better. Truthfully, if your 2010 tax liability was larger than you wanted it to be this past year, then you really, REALLY need to take a hard look at Section 179 this year. The numbers are so good that you would be almost foolish not to take advantage of it – the Government has really stepped it up and made 2011 a big, big year for Section 179.

Here are some 2011 Section 179 numbers for you:

• Maximum Deduction – $500,000 (this is almost double what it recently was)

• Bonus first year depreciation – 100% after $500,000 deduction is reached. (up from 50% previously)

• Total amount of equipment purchased – $2,000,000 (two million dollars).

• The Section 179 deduction decreases on a dollar for dollar basis after the $2,000,000 cap is reached. But two million is a LOT of equipment – and you can use Bonus Depreciation after that cap is reached.

Pretty sweet, isn’t it? That’s why I’m telling you to start planning. And if you finance the equipment, the first year’s payments are almost certain to be less than the tax savings. This means equipment financing and Section 179 equals PROFIT (my regular readers know I tout this often, but it’s worth touting – THIS is “our” bailout, folks. Take advantage.)

Look at the chart on the above to see the savings if you buy $650,000 worth of equipment (equipment you likely need). Almost a quarter-mil… nice.  Your equipment financing charges will likely be less than that.

So anyway, in the end, start planning for a better 2011. That means start planning to use Section 179.

Happy Tax Day, everyone – may the Tax Fairy bring you lots of deductions.

On September 27^th, 2010, HR 5279 (aka The Small Business Jobs and Credit Act of 2010) was passed, and it contained some MAJOR changes in regards to Section 179. In effect, it raised the limits, it brought back an old friend, and it extended these changes for a few years.

Let’s take a closer look and see what changed:

• The total amount of the deduction was DOUBLED to $500,000 (that’s a huge jump).
• The total amount of equipment purchased was MORE than doubled to $2 million (it used to be $800,000).
• The above increases are to be in effect for 2010 and 2011. This is great news!
• Lastly, the bill also brought back the “50% bonus depreciation” for tax year 2010 (it was missing earlier this year, but now has been restored.)

What does this mean for the economy?

It means that government is serious about business spending – in essence, they want businesses to start buying equipment and investing in themselves again. And I have to say, as an equipment finance guy, even I’m impressed by the breadth of these changes – I mean, Section 179 was seriously increased a few years ago, but this increase is just astounding, to say the least.

What does this mean for you?

It means 2010 might be a much brighter year in terms of the bottom line. That’s because this increase happened late in the year – if you finance a nice piece of shiny new equipment right now, it’s very likely you won’t pay anything until 2011, but you take the full amount (up to 500k) as a deduction now. That could mean a MUCH smaller tax bill this year (which translates to a healthier bottom line). And next year? Well, you have the new equipment to help maintain that profitability. It’s win / win.

Sorry if I sound overly excited, but truthfully, I am!