If the initial capital investment has caused you to postpone purchase of a dredge, significant tax incentives exist in 2016, which enable you to buy dredges at sharply reduced costs with little or no initial capital expense – i.e., fantastic tax programs like the Section 179 deduction, as well as low interest rate financing.
NEWS ALERT: SECTION 179 IS $500,000 FOR 2016
Jan 1, 2016 - The "Protecting Americans from Tax Hikes Act of 2015" (PATH Act) was passed by both the House and Senate and signed into law on 12/18/2015. This bill expanded the Section 179 deduction limit to $500,000. Read the summary from the Ways and Means committee here.
Section 179 Deduction: Until further notice, Section 179 is permanent at the $500,000 level. Businesses exceeding a total of $2 million of purchases in qualifying equipment have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million. Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.
50% Bonus Depreciation will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.
IMPORTANT: Section 179 for Current 2016 Tax Year (This Year)
Section 179 can provide you with significant tax relief for this 2016 tax year, but equipment and software must be financed and in place by midnight December 31, 2016. Use this 2016 Section 179 Calculator to see how much the Section 179 tax deduction can save your company.
More about the Section 179 deduction. Many businesses have heard of Section 179 but you may not understand what benefits it can provide business, large and small. Congress introduced the Section 179 deduction to motivate American companies, i.e. your business, to buy equipment and invest in themselves. The program greatly helps small businesses but can also be great for larger companies. The Section 179 deduction enables a company to purchase a piece of qualifying equipment and deduct the entire purchase price from its gross taxable income.
That’s right…THE ENTIRE PRICE of equipment purchases. There are limits to the deduction, including a cap of $500,000 and total equipment purchases of $2,000,000, and you must put the equipment into service by December 31 of the tax year you plan to gain the benefits of Section 179. The equipment must also be used 50% of the time for Business.
In addition to the Section 179 standard deductions mentioned above, there is Bonus Depreciation of 50%; meaning once you have reached the $2,000,000 cap you can depreciate an additional 50% of the balance for the 2016 tax year.
Equipment Purchase Price
First year write off (max for 2015)
50% Bonus First Year Depreciation
Normal First Year Depreciation (20%)
First Year Tax Deduction ($500,000 + $67,500 + $13,500)
The foregoing example it makes it easy to see how it’s a perfect time to buy that piece of equipment you have been waiting for. Who wouldn’t want a 32% discount?
Other Section 179 benefits: It not only works on purchases but also if you decide to finance or even lease your equipment. For a list of qualifying equipment please refer to the IRS page.
A few more things to consider. Your equipment purchase must be used at least 50% for business. There is also a business profit limitation, which means you may not use a Section 179 deduction to deduct more than your net taxable business income for the year. But If you purchase equipment for more than your taxable income you are permitted to deduct the amount up to your taxable income, and you may also deduct the balance and in subsequent tax years. Also, if you show a net loss for the year, you may not take a Section 179 deduction for that year.
If you have any questions about the Section 179 deduction, please review your purchase plans for 2016 with your tax adviser. SRS Crisafulli has inventory of our full line of dredges to meet your needs. Below, see what a purchase of our Rotomite SD-110 dredge might look like – i.e., again a 35% discount using Section 179. WOW!
Contact one of our sales professionals to discuss your dredge equipment needs. We would love to create an equipment package customized for you and enable you to take full advantage of the great Section 179 tax benefit in 2016. ACT NOW!