The new tax laws have created some amazing ramifications for a business who are trying to find ways to increase their bottom line.
Section 179 offers a deduction that has a real impact on equipment costs. Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means if you buy(or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE price from your gross income in the first year.
Several years ago, Section 179 was referred to as the "SUV Tax Loophole" or the "Hummer Deduction" because many businesses used this tax code to write-off the purchase of qualifying vehicles at the time. There have been limitations on this code moving forward.
From Section 179.org:
However, despite the SUV deduction lessened, Section 179 is more beneficial to small businesses than ever. Today, Section 179 is one of the few government incentives available to small businesses and has been included in many of the recent Stimulus Acts and Congressional Tax Bills. Although large businesses also benefit from Section 179 or Bonus Depreciation, the original target of this legislation was much-needed tax relief for small businesses – and millions of small businesses are actually taking action and getting real benefits.
Here is how Section 179 Works:
In the past, the business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. What Section 179 allows is for business to write off the entire qualifying equipment for the current tax year.
Qualifying Equipment includes:
-Equipment used for Business including HVAC equipment
Section 179 can change each year without notice (Section 179 has even changed mid-year), so it benefits you to take advantage of this generous tax code while it’s available. Section 179 offers small businesses a great opportunity to maximize purchasing power. In addition, the recent Stimulus Acts have provided the small business owner with generous new (and higher) deduction limits in certain years. Most of the equipment your business will purchase, finance or lease qualifies for the deduction, so make sure you do your homework to verify that your company is leveraging the Section 179 Deduction this year.
Not only will you receive tax benefits from updating your HVAC equipment, but with the influx in technology in HVAC equipment, the amount of money saved in energy from increased efficiencies could be staggering. In most settings, Heating and Cooling can account for almost 50% of your total energy usage. It's not as fun as a brand new company vehicle, but the savings could be substantial to your bottom line.
As stated earlier, do your homework and check with your accountant on the tax benefits but the time to replace new equipment never has been better.