Our financing affiliate, Michael Smith of Moguler Financial, has some great ideas on sheltering income by purchasing equipment. The following are depreciation rules and examples on equipment purchased in 2016.
IRS section 179 expense election for 2016 is $500,000 on new and used equipment. This means equipment can be fully deducted in 2016 up to $500,000. Any depreciation not used in 2016 can be carried forward into future years.
Bonus depreciation, 50% of new equipment cost has been extended through Dec 31, 2016. This will allow businesses to expense 50% of any new equipment cost in 2016 and depreciate the other 50% over standard depreciation schedules. The 50% bonus depreciation can be carried forward into future years if not used in 2016.
IRS Section 179 Initial Year Deduction and the 50% Bonus Depreciation deductions give businesses a very attractive way to shelter income while allowing them to get the equipment needed to be profitable. I'm attaching examples of the depreciation deductions available for equipment purchased in 2016. Businesses need to contact their CPA/tax advisor for their own tax planning and qualified equipment.
If you have any questions about these tax deductions or need to explore a financing option, please contact Michael Smith of Moguler Financial for a free, no obligation quote, or to discuss your unique business, its' needs and how we can design a financing strategy that best fits your business. He can be reached at (208) 462-2446.
Examples of Depreciation on Equipment Purchases
Equipment Cost = $500,000 or less
Up to $500,000 write-off in year purchased from IRS section 179
100% of its cost can be depreciated !!
Equipment Cost = $650,000
$500,000 write-off in year purchased from IRS code 179 (unused portion $150,000)
+ $75,000 write-off from 50% bonus depreciation on the unused $150,000 (unused portion $75,000)
+ Normal 1st year depreciation
$575,000 plus normal depreciation for current tax year or more than 88% of its cost !!
Equipment Cost = $800,000
$500,000 write-off in year purchased from IRS code 179 (unused portion $300,000)
+ $150,000 write-off from 50% bonus depreciation on the unused $300,000 (unused portion $150,000)
+ Normal depreciation rate for property
$650,000 plus normal depreciation for current tax year or more than 81% of its cost !!
Equipment Cost = $1,000,000
$500,000 write-off in year purchased from IRS code 179 (unused portion $500,000)
+ $250,000 write-off from 50% bonus depreciation on the unused $500,000 (unused portion $250,000)
+ Normal depreciation rate for property
$750,000 plus normal depreciation for current tax year or more than 75% of its cost !!
Equipment Cost = $2,000,000
$500,000 write-off in year purchased from IRS code 179 (unused portion $1,500,000)
+ $750,000 write-off from 50% bonus depreciation on the unused $1,500,000 (unused portion $750,000)
+ Normal depreciation rate for property
$1,250,000 plus normal depreciation for current tax year or more than 62% of its cost !!
Note:
IRS section 179 can be used for both new and used equipment
50% Bonus Depreciation is only for new equipment
These examples assume new equipment
