Get an Extra Return from Your Machinery Investment
For manufacturers looking to make a machine investment, the time has never been better.
In December 2015, the House and Senate passed “The Protecting Americans from Tax Hikes Act of 2015” (PATH Act) into law. Two key components of this new law are the extension of the Section 179 Deduction to a permanent level of $500,000 and the extension of the 50% Bonus Depreciation through December 31, 2017.
Section 179 Deduction
This deduction is designed for small to medium-sized businesses and larger businesses who are not spending over $2 million in capital equipment per year. This deduction allows many businesses to write off the entire cost of the machinery they purchase, lease or finance in the year it is delivered.
50% Bonus Depreciation
This deduction is designed for larger businesses since there is no limit on how much you can spend per year on Capital Equipment. This deduction allows businesses to write off 50% of the entire cost of the machinery they purchase, lease or finance in the year it is delivered.
How These Deductions Work For You
If you spend less than $2 million on capital equipment for the calendar year, you can claim the full Section 179 Deduction on the first $ 500,000 and the 50% Bonus Depreciation on the remaining capital equipment purchases.
If you spend over $2 million but less than $2.5 million on capital equipment for the calendar year, you can claim a partial Section 179 Deduction and the 50% Bonus Depreciation on the remaining capital equipment purchases. The Section 179 Deduction phases out dollar-for-dollar for any purchases above $2 million and goes away totally if your total capital equipment purchases are above $2.5 million.
If you spend more than $2.5 million on capital equipment for the calendar year, you can claim just the 50% Bonus Depreciation on all capital equipment purchases.
To qualify for these deductions in 2016, equipment must be delivered by December 31, 2016.
If you have any questions regarding these deductions or would like more information on how these deductions can actually pay for your first years lease payments on the machinery you are considering, contact the leasing department at Stiles Machinery.
What Qualifies for These Deductions
- New and used machinery purchased for business use (Note: Only new machinery qualifies for the 50% Bonus Depreciation)
- Computers and off-the-shelf software
- Tangible personal property used in business
- Office furniture and fixtures