Tax benefits are calculated using an estimated income tax rate of 32%.

This calculator presents a possible tax scenario. This page and calculator are not tax advice. The indicated tax treatment applies only to transactions deemed to reflect a purchase of the equipment or a capitalized lease purchase transaction. Please see your tax advisor to determine the tax ramifications of acquiring equipment or software in your particular situation.

Business Equipment – Section 179 Expensing Allowance

Under the IRS Section 179, a taxpayer may expense up to $1,220,000 of qualified equipment placed in service in 2024 (amounts will be indexed for inflation in future years). The rules are designed for small companies, so the $1,220,000 deduction phases out when a business purchases more than $3,050,000 in one year. (Companies cannot write off more than their taxable income)

Bonus Depreciation – 100% for 2024

The Tax Cuts and Jobs Act enacted in 2018 increased the first-year bonus depreciation to 100% for qualified investments made after Sept. 27 2017 and before Jan 1, 2023. Bonus depreciation is available for all businesses, is not capped at a certain dollar level and is good for new or used property. The 100% immediate expensing of asset acquisitions will be permitted for tax years 2018 through 2022 before reducing to 80% in 2023, 60% in 2024, 40% in 2025 and 20% in 2026.

Benefits of Finance Agreements and Capital Leases

Maximize the tax benefit with a Group Financial Services finance agreement (conditional sales contract) or capital lease. Both allow a business to acquire equipment with a low monthly payment while taking advantage of the Section 179 Expensing allowance and Bonus Depreciation. Examples of capital leases include a $1.00 buyout lease and a capitalized 10% purchase option lease.

Tax Code Section 179 & Election to Expense Detail

The election, which is made on Form 4562, is for the tax year the property was placed in service or an amended return filed within the time prescribed by law. The total cost of property that may be expensed for any tax year cannot exceed the total amount of taxable income during the tax year. Section 179 property is property that you acquire by purchase for use in the active conduct of your business. To ensure property qualifies, reference Publication 946.

This expense deduction is provided for taxpayers (other than estates, trusts or certain non-corporate lessors) who elect to treat the cost of qualifying property as an expense rather than a capital expenditure. Under Section 179, equipment purchases, up to the amount approved for a given year, can be expensed (deducted from taxable income) if installed (placed in service) by December 31st. Non-Tax leases qualify for this deduction in their year of inception. Any excess above the expensed amount can be depreciated depending on the equipment type.

Often, the same asset will qualify for Section 179 Expensing and Bonus Depreciation. In this event, you decide what method to use or you may choose to combine methods. If you decide to claim both for the same asset, you must use Section 179 first, then Bonus Depreciation

Not all states follow federal law. Contact your tax advisor for further detail or visit www.irs.gov