I can hear you saying “But Fletch, nobody talks about Section 179 early in the year. In fact, I never even think about it until the fourth quarter when I’m scrambling to get my equipment purchases in to make the deadline.”

And that’s exactly my point. Using Section 179 earlier in the year makes a ton of sense. Let me list a few reasons why:

You LOCK IN Your Tax Deduction

I’ve known companies who held off on a Section 179 purchase, opting to wait until later in the year. Then, for whatever reason, the purchase never happened, and they missed the deduction. Now maybe the reason was that the equipment delivery timeframes were too long to make it by year-end. But usually it was something minor, and acquiring new equipment got pushed a bit because it was another “thing” on the list. 

Making your Section 179 purchases early in the year guarantees you will get the deduction. If you plan to acquire eligible equipment this year, and you can acquire that equipment now, then you probably should. 

The Equipment Earns Revenue

In most cases, a Section 179 purchase is tied to earning revenue. Machinery,  vehicles, technology… these all earn revenue, most of them from the day you put it into service.  Having more months of revenue producing equipment at your disposal has no downside. You’ll still get the deduction, and you had the advantage of the equipment working for you all year. Not a bad deal. 

Not Rushing to Buy = Better Equipment Choices

When you are rushing to beat the deadline late in the year, your equipment options may be limited. Did you really want the bare bones model in “Mud Brown”? No? Then why did you wait? Because that’s all the dealer has left, and there’s no time left to order a different one. Take it or leave it. 

Note: they probably had 50 of them back in March. With all kinds of helpful options… in “Midnight Blue” no less! 

Wrapping Up

Section 179 is good on purchases made all year. But there are definite advantages to using Section 179 early in the year. You guarantee you’ll get the deduction, you can earn more revenue, and the selection is probably a lot better, especially since you’re not in a rush to buy.  

If you need it, get it. That’s my take! 

2022 was the year of inflation and interest rate hikes, both of which I’ve discussed at length in this blog. But there’s no getting around it – high inflation and rising interest rates (which are rising to combat said inflation) have affected every business out there. 

So with that in mind, here are a few year-end strategies that can help your 2023 start off right. 

1. Remember That Rates Are Likely to Keep Rising

I’m confident that the rates we have right now will be lower than any rate we see in 2023. Hopefully we won’t see several 75 basis point increases in a row anymore, but the scenario of “no 2023 increases” is extremely unlikely. And decreases are even more unlikely. 

This means you really can’t afford to hold out for lower rates if you need to replace machinery or make improvements. Because you will be holding out for a looong time. Which brings me to… 

2. Do More Than Your Competition.

Think about cyclists racing – the prevailing thought is you separate yourself from others on the difficult hills, and not the flat ground where it’s easy to ride. It’s the same right now for businesses.

In a booming economy with low rates, everyone can be a competitor. But it’s in the more difficult economic times that companies really make strides and pass others. Let everyone else turtle because rates went up a point or whatnot. Demand is still strong for most industries, and the companies that can best meet that demand will be the winners once the economy turns (and it always turns).  

3. Don’t forget your Section 179 deduction. 

Listen, I know taxes and “the IRS” are the last things you want to hear right now, but hidden within those words is the single best business tax deduction possible: Section 179.

Almost every piece of tangible equipment you bought for your company in 2022 is likely eligible for a full Section 179 deduction. And the deduction is good up until $1.08 million dollars of purchases is reached. 

For small businesses, that prettymuch means your entire years’ worth of equipment purchases can be deducted (as opposed to depreciating a small amount each year). Depending on your revenues, that can make a massive difference in your bottom line right now. And what company out there doesn’t need the money right now?

2022 was not easy by any stretch. But we’re all still here and 2023 is coming no matter what. This is what we have to work with, so let’s make the best of it. 

Happy New Year everyone! 

First and foremost, I’d like to see interest rates stabilize. That would be my main wish for 2023. It’s not going to come true of course, but it doesn’t mean I can’t ask for it. The reality is rates will probably keep rising for a few more cycles. How much is unknown, so maybe “not seeing as many ‘big’ increases in a row” could be a more reasonable wish. THAT one has a shot at coming true. 

Second, I would like to see the supply chain loosen up a little more. We’re still seeing supply chain issues, and while there are industries that are close to returning to normal, there are others where items simply cannot be had. Plus, the computer chip shortage is still a major thing, and it’s affecting many industries, as well as keeping a PlayStation 5 out of my wanting hands.

I’ll stick with economics as a third wish, as it really dominates all industries right now. I wish for less government spending, as that’s not helping inflation at all. It seems like rate hikes could eventually push us into a small recession, and I’d like to see all possible efforts to avoid that utilized. That means reigning in govt spending. I’m not going to get into sides here or political details as that’s pointless – just cut spending please. Thank you. 

One last wish on a personal/professional level: I want more companies to look at offering equipment financing. Because it’s easily the single best sales boost any equipment seller/vendor can deploy. And it’s not only free; it’s ridiculously easy and straightforward too. If a company is not offering financing, I guarantee doing such will instantly make 2023 better than 2022 was.  

Ok there you have it – my wish list for 2022. Almost all economic, but hey, that’s where we are today. I’ll deal with it by cranking up some Jimi on Christmas morning (I hope!)

Honestly, I feel bad for Section 179, because all I’m seeing in the news is inflation and rates. I hear about how everything costs more. But I never hear about the single best business incentive ever invented: our friend Section 179.

But it’s still here in 2022, and it’s better than ever. Here are a few numbers for you:

• The deduction is a robust $1,080,000. That’s one million, eighty thousand dollars (up 30k from 2021’s limits). 
• The total amount a business can spend before the deduction starts to decrease is $2.7 million.

The above is simple: it means you can deduct the full price of qualifying new or used equipment, up to $1,080,000. And when you reach a total of $2.7 million spent, the deduction then decreases on a dollar for dollar basis. Most small businesses will never get near that amount spent, so this is really big. It means pretty much anything you buy for your business can be deducted 100% (almost all tangible business equipment, new or used, qualifies). 

Financing Increases Your Leverage

I’ve mentioned this “business hack” previously, but it’s well worth repeating. If you finance section 179 equipment, you will likely save more on your taxes than the total amount of your payments this year. 

Here’s an example: say you finance a piece of $100k equipment this summer. You deduct the entire thing at year’s end. At a 35% tax rate, that’s $35k off your taxes – that’s real money that stays in your bank account.

From summer to the end of the year, let’s say you pay approximately $12k in finance payments for this equipment. So you saved $35k in taxes, and paid out $12k in payments. Your net saved is $23k.   

That means the equipment technically cost you nothing this year. PLUS it made your bank account $23k larger. AND you got to use the equipment to hopefully make more revenue. Yes, this is real. 

Can you see why I love Section 179 so much, and why so many businesses use it? I never fail to bring up Section 179 when I’m talking to a business. It’s simply the best tax deduction imaginable, and it’s one every business should use every year.

It makes more sense than ever to take advantage of Section 179. All you have to do is read my past few blog posts – there you find talk of rate increases, record inflation, increased lead times, and even used equipment costing more. 

All of these things mean a company has more overhead. Yes, the cost of doing business always seems to go up no matter what industry you are in, but right now, the increase is abnormal. So this makes Section 179 more important than ever.

It helps greatly that Section 179 got a robust increase in 2022 – $1,080,000 – that’s up 30k from 2021. But even if you never approach those limits, deducting the full cost of eligible new (or used) equipment is extremely beneficial.

Quick math: at a 35% tax rate, writing off a $50,000 piece of equipment will save you $17,500 in taxes. These are real dollars that stay in your bank account.

Ok, now let’s talk financing. When you finance equipment and take a Section 179 deduction, it’s extremely beneficial to your bottom line. Let’s look at this more in-depth using our $17,500 number.

Say you financed that $50k piece of equipment. Let’s assume a monthly payment of $950. You take that $17,500 you are saving, and divide it by $950… that gives us 18.4… that’s how many months your tax savings will pay your loan payment.

In other words, just because you took the Section 179 deduction, you are literally using that financed equipment for free for the first 18 and a half months of the loan.  And hopefully you are using that equipment to make MORE revenue, so it’s a win all around. 

Section 179 and equipment financing is extremely powerful. But it has never been as important as it is here in 2022. Make sure you take advantage of it. 

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.

The pandemic is still hanging in there, but we’re moving forward to some sense of “normality”. But this normal is indeed a “new” one.

Regardless of where the economy is going (and we’re quite optimistic here), it’s clear that on the whole, everything is going to cost more for the foreseeable future. 

There are many factors causing this: shortages of raw materials, shipping disruptions, a rapidly-changing labor market, and other pandemic-related factors. But (and this is good news) demand across most industries has held steady. The supply is a problem, whether that supply is goods or people to build/move them. 

And it’s simple economics that when there’s ample demand with a limited supply, prices must rise. This includes the price of goods (both new and used), as well as the cost to borrow (i.e., interest rates.)

Waiting is Costly

What this means for businesses is obvious. Waiting to buy needed equipment, be it vehicles, machines, software, servers, or anything else, means you will absolutely pay more than if you bought it right now. 

The cost of the equipment itself will be higher (both new and used). And rates will be higher too. So whether you’re paying cash or financing, waiting is costly. 

No matter what it is you are looking to buy, right now is the lowest price you are going to see, and likely the lowest rate as well.

Locking in with fixed-rate financing is easily the best way to protect yourself from paying more than you should. Again, this is simple economics.

I know, there’s an elephant in this room. I can hear it now: “Chris, you work for an equipment financing company. Of course you’re saying to finance now.”

Well, yea. But is anything I’m pointing out inaccurate? Do you truly feel prices on anything are going to drop? If you think they are, then I have a bridge to sell you (note: act now, as the price of that is going up too.)

Seriously, the die has been cast. We can argue as to the causes, but the fact is, this is our business climate, and smart companies don’t complain – they act. 

I’m writing this in September of 2021, and I strongly feel that whenever you are reading this – be it now or three years from now – today will be the lowest price and rate you will see on whatever it is you want to buy.

Despite this, I am very bullish on the future. Demand for almost everything remains extremely strong. The smart companies will do fine. 

Again, financing equipment you need (or are going to need) right now is your best hedge against rising prices and rates. Locking in is a sound strategy. 

Curious if you can be pre-qualified? We can do that in two minutes right here.

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Section 179 doesn’t care if you’re a sole proprietor, a partnership, or a corporation. It doesn’t care if you’re on Main Street or Wall Street. It doesn’t care if you have nine buildings and 10,000 employees, or if you’re a classic small business with one location and a handful of employees.

Here’s what you need to qualify for Section 179:

Be a Real Business. This means you’re a registered business, with a business bank account. 

Show a Profit. Since Section 179 reduces a company’s taxable income, the company must have taxable income in the first place. Also note that Section 179 cannot be used to “create” a loss. 

Buy / Finance Eligible Equipment and Put it into Service. Pretty self-explanatory here. You have to buy eligible equipment (which, honestly, is just about any tangible equipment you use in your business), and start using it by the deadline (always midnight Dec 31 of the current year).

And that’s it. 

I got on this topic again because my commercial landscaper friend told me he couldn’t fully deduct several new zero-turn mowers, and instead had to depreciate them yearly – basically, he said “only big businesses get the big write-offs”. I asked him why he thought that, and he really couldn’t answer me – he just assumed that a small business like his couldn’t fully deduct equipment purchases. Not true at all.  Trust me, I set him straight.  

It always amazes me how many businesspeople either haven’t heard of Section 179, or if they have, think it isn’t for them. I’m also somewhat amazed that their accountants aren’t mentioning it. Maybe they feel the client needs to ask about it, or they assume the client would rather have a smaller yearly write-off? I don’t know all the answers there, but I do know almost everyone who “didn’t” know about Section 179 is super enthused once they learn that yes, it’s for them too. 

Bottom line: As long as there’s taxable income and eligible equipment purchased for business use, Section 179 is there to be used. So use it.  

It goes back to when I was a kid. As I’ve mentioned in previous posts over the years, I was the guy with the Tonka® trucks. So I kind of gravitate to heavy equipment, construction machinery, and related. Usually when we finance a piece of construction equipment, we get information on the make, model, specs, a picture or three, and similar. Even now, in my adult years, I imagine these immense machines, with giant tires (or maybe even tank treads) moving, pushing, and shoveling earth. I won’t say whether I have a toy truck or three in my desk drawer or not. And if I did, I’m not going to say whether they come out at lunchtime…

One thing I do like is the number of companies that come to us to lease a dump truck or finance a backhoe. In fact, over the last few years, heavy equipment financing has really taken off as the economy improves, and Crest Capital has sort of become known as a prolific heavy equipment financing company (amongst other types of industrial machinery – CNC machines still lead the pack).

Recently, a client mentioned financing and the holidays, and is where I got the title to this post – he said “I felt like the bank was Scrooge, with a long list of legalese. My wife asked me what I wanted for Christmas, and I actually blurted out something like ‘I want a heavy equipment financing company that doesn’t make it hard’. Well, my gift to myself was I found you, and my wife is probably getting me the camera I wanted, so it’s a good December.”

That’s what I like to hear. Now if you’ll excuse me, I have to check my desk drawer before I make my Christmas list…

It’s been awhile since I posted about Section 179, so let’s discuss this thoroughly awesome tax deduction.

It’s the time of year when you should start thinking hard about Section 179 – especially if you haven’t bought any qualifying equipment yet. That’s because congress raised Section 179’s deduction to a robust $500,000. This means you can buy equipment now, and write off the entire purchase price this year, for up to a cool half mil.

The amount of money this allows you to keep at tax time can be substantial. Figuring a conservative tax rate of 25%, a $100,000 piece of equipment (thus a $100,000 tax deduction) translates to $25,000 in real dollars that stays in your bank account (as opposed to going to Uncle Sam’s).

You can look at that 25k several ways:

1. If you paid cash for the 100k piece of equipment, you could say you got a fat 25% discount.
2. That 25k can be added to your bottom line.
3. If you financed the 100k, well, I need a little more space, because it’s a big deal…

If you financed that 100k right now (late September), you will likely pay 2-3 payments this year, then get a $25k savings on your taxes. Netted out, this means you paid nothing for the equipment this year.

It gets better – until your payments equal the 25k you saved, you still theoretically paid nothing for the equipment.  So perhaps you get to use the equipment for free all of next year too!

But wait, there’s more!!!

Since from Sept of this year until that 25k is met, the equipment costs you $0 in net dollars. But all of that time, the equipment is being used, generating you revenue. This pushes the time the equipment actually “costs” you money out even further. Depending on how much revenue that equipment generates, your payments may never catch up to the money you kept (the net 25k from the deduction), and the additional revenue generated. So in essence, the equipment was free.

Read that again if you have to. Here, I’ll make a quick math equation:

TS + (NR x T) – TMP = P$

Tax savings (TS) plus new revenue (NR) over the term (T) less Total Monthly Payments (TMP) = Profit (P$)

I know, it sounds too good to be true, but it isn’t. That’s why Section 179 rocks!