As businesses enter the fourth quarter and year-end is quickly approaching, many are considering purchases and knowing about the available tax incentives is an important aspect of the decision.
In the past, Section 179 has gone hand-in-hand with bonus depreciation, both valuable tax incentives. This year, changes have been made to Section 179 and bonus depreciation. With the changes, the two aren’t used together, but rather can be looked at as separate opportunities – both valuable opportunities, depending on each company’s unique needs.
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Looking strictly at bonus depreciation, here are the two key updates made in 2018 and what they mean heading into year-end.
Previously, bonus depreciation could be applied on a qualified purchase at 50%. The new law increases the percentage to 100%. Bonus depreciation is expected to stay at 100% for five years, then begin to phase down in the subsequent years.
As a result, companies may choose to apply bonus depreciation to purchases and forgo the Section 179 deduction. However, bonus depreciation rules can vary per state so it’s a good idea to check with an accountant or trusted tax advisor to determine the best option.
Perhaps the most significant change to bonus depreciation is that used equipment is now eligible. In the past, the Section 179 deduction could be applied to used equipment, but bonus depreciation could not.
This is an exciting change for those who have been thinking about adding used machines to a fleet. Along with the healthy state of used equipment and values, bonus depreciation eligibility makes now an ideal time to move ahead with used equipment purchases.
As stated earlier, all business owners should consult their accountant or trusted tax advisor before deciding to make purchases and take advantage of the bonus depreciation incentive.
If the decision is made to make a purchase, look to a trusted dealer and one that has a robust selection of both new and used equipment, like RDO Equipment Co. Our experts not only will help you find the right machine to fit needs, they’ll offer the service and support that’s still needed long after the sale and bonus depreciation has been applied.
About The Author
Dennis Howard is Vice President of Fleet and Remarketing with RDO Equipment Co. and based in San Antonio, TX.