Volvo CE US

MAKE THE MOST OF YOUR USED EQUIPMENT PURCHASES WITH SECTION 179*

BONUS DEPRECIATION AND SECTION 179 CHANGES AT A GLANCE
Previous Years 2018
Bonus Depreciation 50% of cost of new equipment purchases (Used does not apply) 100% of cost of New & USED equipment obtained through an unrelated third party
Section 179 Deduction Amount $500k $1M
Section 179 Eligible Business Up to $1M annual equipment purchases Up to $2.5M annual equipment purchases

What is Bonus Depreciation?

Bonus depreciation is a first-year allowance that acts to accelerate depreciation. Over the years, there have been varying percentages applied to the cost of purchased items. Under the new law, the percentage for property placed in service after September 27, 2017, and through 2022 is 100%, so full expensing is allowed for qualifying property. You can elect to use a 50% allowance for your first tax year ending after September 27, 2017. The 100% allowance will decline to 80% in 2023, 60% in 2024, 40%in 2025, and 20% in 2026, with none allowed after 2026. (Certain longer production property gets an extra year.)

Bonus Depreciation Applies to USED Equipment for the first time in 2018!

As for bonus depreciation in 2018, 100 percent of the cost of new and used equipment acquired and placed in service can be deducted in the current year as opposed to 50 percent in 2017 on new equipment only. The increase was a pleasant surprise to taxpayers as, before tax reform, the 2018 deduction was expected to be only 40 percent.

What is Section 179?

In the simplest of terms, Section 179 allows you to deduct the full purchase price of qualifying machinery equipment purchased or financed during the year from your gross income (before taxes are taken out). This was specifically designed with you in mind and all small business owners should take advantage of Section 179.

Section 179 limits increased for 2018

Beginning in 2018, the limit on the amount that can be deducted for Section 179 has been increased to $1,000,000 with a spending cap of $2,500,000. This means that up to $1,000,000 of new and used equipment purchased and placed in service for use on the farm or business can all be deducted as an expense in the current year, as long as the total dollar amount of equipment purchased does not exceed $2,500,000. Once the spending cap is exceeded, the deduction received is reduced dollar for dollar. For example, if your total cost of equipment purchased during the year is $3,000,000, the deduction you would receive would be $500,000. These limits on Section 179 have increased significantly from an allowable deduction of $510,000 with a spending cap of $2,030,000 in 2017.

Financing and Leasing with Section 179

Using Section 179 with an Equipment Lease or an Equipment Financing Agreement might be the most profitable decision you make this year.

Why? Because the taxes you save with the deduction will almost always exceed your cash outlay for the year when you combine (i) a properly structured Equipment Lease or Equipment Finance Agreement with (ii) a full Section 179 deduction. It is a bottom-line enhancing tool that allows you to add new equipment, vehicles, and/or software to your business.

Section179.Org encourages the use of Section 179 Qualified Financing for all business equipment purchases. In addition, Section 179 qualified financing comes with a ‘$179 Bonus per $10,000 Financed’ for a limited time during the 2018 year. This means that you (a) get your equipment, vehicles, and/or software now, (b) get to take full advantage of the Section 179 deduction in 2018, and (c) get bonus cash as well.

What’s the difference between Section 179 and Bonus Depreciation?

Bonus depreciation is offered some years, and some years it isn’t. Right now in 2018, it’s being offered at 100%.

The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used equipment.

Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $2,500,000) on new capital equipment. Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.

When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years.

Click here to go to the Section 179 Calculator

For more details on Section 179 and Bonus Appreciation visit section179.org or talk to your local tax expert.

*Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Please contact a tax professional before you make any tax related decisions.

About Volvo Used Equipment

Tara Stryker
Director – Volvo Remarketing Services>
908-268-5638
Jared Haughton
Regional Sales Manager – Volvo Remarketing Services>
717-609-9990
Ernesto Gonzalez
Regional Sales Manager – Volvo Remarketing Services>
305-794-9501
Raul Manzano
National Accounts Manager, Rental Channel & Remarketing Canada>
416-357-6108

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