Tax Deduction Solutions for Machinery Investments
For manufacturers looking to make a machine investment, the time has never been better.
In December 2017, the House and Senate passed the “Tax Cuts and Jobs Act” into law. Two key components of this new law are the extension of the Section 179 Deduction to a permanent level of $1,000,000 and the increase of the Bonus Depreciation to 100% through December 31, 2022.
DEDUCTION OPTION 1: SECTION 179
Designed for businesses who are not investing over $2.5 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, up to $1 million.
DEDUCTION OPTION 2: BONUS DEPRECIATION
Designed for businesses investing in over $2.5 million in capital equipment, as there is no limit on this deduction. Businesses can write off 100% of the cost of the machinery they purchase, lease or finance in the year it is delivered. This deduction expires after 2022.
WHAT QUALIFIES FOR THESE DEDUCTIONS
Any of the following items that have been purchased or leased on a $1.00 buyout lease:
- New and used machinery
- Computers and off-the-shelf software
- Tangible personal property used in business
- Office furniture and fixtures
To qualify for these deductions in 2019, equipment must be delivered by December 31, 2019.