1. A Nice Increase for Section 179

Section 179 was made permanent a few years ago, and it’s received small annual increases since (this year it’s $1,050,000, up 10K from 2020’s $1,040,000). Ok, a 10k a year increase always helps, but it’s small when compared to the “million dollars” the deduction is. I’d like to see an increase with another zero. And maybe a crooked number in front. It’ll help spur business spending.

2. Inflation Going Away

I’m reading the consumer Price Index rose 6.2 percent in October from a year earlier. That’s the biggest increase since the 90’s. I’d like it to stop please.

I feel it will, simply because I suspect a lot of price increases are more for coping with the aftermath of pandemic shutdowns than anything else. Supply chain disruptions, labor shortages – they all created more demand than supply, which means prices must increase. But I already “feel” it – we’re hitting our new norm, and prices should stabilize. That’s my hope, anyway.

3. Businesses Further Innovating

Here’s an excellent example of the pandemic making businesses innovate and take advantage of technology: almost all hotels now have “touchless” check-in and check-out. The pandemic forced them into this, but as a consumer, I love it, and wonder why they didn’t do this sooner. I really like not waiting to check out, and just dropping my keycard in box at the desk. 

This is better for the hotel too – now the clerk doesn’t have to spend time checking people out. They had access to this technology years ago, but it took the pandemic to make this win/win scenario a thing. Here’s hoping more companies start taking advantage of technology (and hey, let me remind you that Software Financing is a thing). 

4. Fletch wants a PlayStation 5

Yes, I am a big kid, and I want a PlayStation 5. I’m pretty sure I’m not getting one this year, as they are super scarce. But I’ll still mention it, as that’s the “wish” part of the wish list.

All in all, I’m always optimistic about the future, but even more so right now. As a country (and a planet) we’ve taken some big, disrupting hits, and while some businesses were negatively affected, strong companies are surviving. The best is definitely yet to come.  

Of course, this argument has been going on for centuries (the USA was founded partly due to unhappiness with taxes), but there is a very valid point here. “Enough with the taxes” say small and mid-sized companies, and they’re right.

Businesspeople, especially those entrepreneurs who put in the 12-14 hour days to make their businesses succeed, always seem to take the brunt of it. It’s easy to say “tax Bill Gates more” (even Bill says that.) But tax increases typically include more taxes on working businesspeople. The owner of that 5-75 employee company feels like he or she pays enough taxes, and I cannot say I disagree.

But taxes are inevitable. We can yell, write, and argue until we are blue in the face. The taxes will still be there.

So let me tell you the single best way to reduce your tax burden. Use Section 179 annually. 

This accomplishes two things: First, you get equipment your business needs anyway. All businesses use equipment, so getting yourself on a consistent “let’s upgrade our equipment” schedule can help you in a productivity sense (better equipment = more efficient operations). 

But the big takeaway is getting new (or new to you) equipment also lets you MARKEDLY REDUCE THE TAX YOU PAY.  

Section 179 lets you write off the entire purchase price of qualifying equipment (even if you finance the equipment). This comes right off your taxable income, and can really make a huge difference in your tax obligation. 

In short, you keep more of your own money, instead of giving it to the IRS. There is not a small or mid-size business owner alive who doesn’t appreciate that.

I’ve been touting Section 179 for well over a decade now. But this is the strongest I’ve ever felt about it. It’s your money – keep more of it. 

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! 

Ok, the dust has settled, the holidays are over, and I have some time to discuss Section 179.

As I mentioned in a post a few weeks ago, Section 179 got a big boost from the Tax Cuts and Jobs Act. But I felt like I had to write about all of the major business aspects of the act, and Mrs. Fletch had all kinds of holiday plans as well, so Section 179 got a paragraph. But now I have a moment where I can sit back and take in all that happened with Section 179, and share it with you.

The title of this post emphasizes how extraordinary this is. The Section 179 deduction was not only given an increase – it literally doubled in size, to one million dollars. This is a massive boost, and will really help a lot of small and medium sized businesses, because they can now write off a million dollars’ worth of equipment for the year. If we assume a tax rate of 25%, this could knock a net of 250k off the tax bill – the sheer size of the numbers is really exciting.

Further, the “cap” of total equipment purchases was raised to $2.5 million before the deduction starts to phase out on a dollar to dollar basis. Another change is certain improvements to non-residential property can now be written off.

Lastly, the “bonus depreciation” (which is usually taken after Section 179 is used up) has been raised to 100%, and now includes used equipment as well (Section 179 itself has always allowed for used equipment).  That’s a nice little bow to wrap things up.

These changes are coming at the opportune time as well, because the economy was strong last year. So I’m sure companies will use 2018 to really “gear up”. This is good news for everyone – companies that make equipment, their employees, the towns they are based in, etc… everyone benefits when businesses buy equipment, and 2018 should be a banner year for this. Maybe even the best ever.

Get your equipment financing lined up, and get shopping, because Section 179 is HUGE.

As you probably know, Section 179 (the “buy equipment and get a sweet tax break” tax deduction) got a nice boost this year. In fact, the maximum deduction this year has been raised to 500k. That’s five hundred thousand dollars that you can deduct from your company’s income this year (assuming you buy that much equipment, of course).

Here’s the upside for you – no matter what type of company you are, you use equipment in your business. Machinery, vehicles, tools, software, office machines, chairs, tables, store fixtures… you name it.

Knowing this, it’s almost a given that there is some type of equipment in your company that could use an upgrade. And, as any smart businessperson knows, good equipment is profitable. Even something that is not “obvious”, like new chairs and desks, can have a marked effect on employee productivity.

With all of this said, there’s 500,000 reasons why you would want to buy new (or new to you) equipment THIS year. The deduction is good only if you buy and put the equipment into service by midnight, 12/31/2013. After that, you have to go by whatever rules Section 179 will follow for 2014. And there’s a good chance it’s not the same “half a million” number (if you look at the history of Section 179, you’ll see it has varied quite a bit over the years.)

So the time to act is 2013, and, as the autumn air tells us, 2013 is fast drawing to a close. So again, this is my reminder to all businesspeople – the Section 179 deduction is super-generous this year, and it definitely should be taken advantage of.  It’s a “use it or lose it” proposition, so Fletch suggests you definitely look around your company and see what could use an upgrade. You Uncle Sam will reward you handsomely for doing such.

Hi Fletch,

I’ve been reading you for three years now, and I notice you go on and on about Section 179. You’re saying get it now, because it might go away. You cheer when it gets renewed, and you moan when it goes down, again and again. Rinse/repeat.

So my question is this: Why doesn’t the government just make a number for Section 179, and leave it alone? Why the constant game and tweaking and “will they or won’t they”?

John

Hi John,

Thanks for the note, and thanks for reading the blog.

You know, that’s not a bad question on the surface, but I think if you look at just why Section 179 is even here, the answer presents itself.

See, Section 179 is meant to be a stimulus for the economy. A gift to businesses, if you will. But it’s a gift to get them to spend (after all, it’s meant to spur spending on business equipment.) And a lot of people benefit from it – businesses who buy equipment, businesses who make equipment, and equipment financing / equipment leasing companies who lend the money for it. And accountants love it too.

But if Section 179 were just left at a static number year after year, there would be no rush to use it. There’d be no “we’d better buy equipment THIS year, because we want the big Section 179 deduction”. It just wouldn’t be special. So that’s why (I think) they keep playing the game, as you call it – it’s to keep businesses guessing, and hopefully, spur spending just when the country needs it.

So by keeping Section 179 as a year to year thing, and by keeping businesses somewhat in the dark as to future plans, it does exactly what the government wants it to do – increase business spending now.

Does that make sense?