Section 179 lets you take a $500K deduction for your material handling equipment purchase this year
The limit for the Section 179 deduction was supposed to drop to a mere $25,000 for 2013, but luckily for small and medium business, it was increased to $500,000-thanks to the American Taxpayer Relief Act of 2012 (here ‘s the link to that Act just in case you need to some light bedtime reading). The deduction limit is scheduled to drop to $25,000 in 2014, so this is definitely the year to take advantage of this sweet bit of tax code if you foresee purchasing new material handling equipment for your warehouse or distribution center.
How does the Section 179 deduction work?
Section 179 expensing is also called first year expensing. It ‘s simple: instead of deducting the cost of your new equipment in small increments over a period of many years, you can take advantage of Section 179 to deduct up to $500,000 of 2013 capital expenditures from your gross income in the very first year. So if you spend $500,000 on business equipment, you can deduct the full amount of your purchase.
Section 179 Spending Limit
There is a spending limit to qualify for the full $500,000 deduction. You can spend up to $2,000,000 on new equipment and still get the full advantage of the Section 179 deduction. If you spend more than $2,000,000 on new equipment, the deduction begins to phase out dollar for dollar. This is what really gears it toward small and medium-sized businesses. But even large businesses that spend more than $2,000,000 can benefit somewhat because they can take a bonus depreciation of 50% on the amount that exceeds the that limit.
Section 179 Net Income Limit
There is another limit and it ‘s based on profits. If your net income is less than the cost of the equipment you want to deduct, you won ‘t be able to deduct more than that income amount, but you can carry it forward and deduct it in any future year. Even if your business is not profitable this year, you will be able to claim the deduction in the future when your business becomes profitable.
The Bottom Line
The bottom line is the Section 179 deduction will significantly lower the cost of your material handling equipment purchase. Go here to use this nifty Section 179 Calculator to help you estimate your savings. Of course the deduction can be used for almost any type of business equipment, including office furniture, computers and software (click here to see the list of qualifying business equipment). Whatever your warehousing needs, it would be beneficial to take advantage of as much of the Section 179 deduction as possible in 2013.
Next Level understands and appreciates the impact of operational costs on any size business and we are committed to helping our customers increase efficiency and profitability through lower material expenditures and cost efficient design solutions. If you want to take advantage of the Section 179 deduction but can’t take delivery until 2014, we can accommodate your schedule.