Has your accountant ever said to you “you need to chase some 179 tax dollars”? You ask what that is and he just says go buy some equipment and you do and that’s it. Most people think the Section 179 deduction is something only a team of accountants can figure out, but it really isn’t. Basically, the Section 179 tax deduction is an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves. When your business buys certain items of equipment, it typically allows you to write them off a little bit at a time through depreciation. However, Section 179 allows you to deduct the full purchase price of new or used equipment and software that is purchased or leased in the tax year. In 2015 the deduction limit is $25,000, but there is a petition to get it raised to $500,000 (you can go here to sign the petition). Now that you have a basic idea of how simple the tax code is let’s take a look at an example compliments of Crest Capital.
Example: If you purchase or lease $50,000 in equipment this year, you will have a first year write of $25,000 ($25,000 equals the maximum in 2015) plus your normal first year depreciation of $5,000 (this normally equates to 20% a year for five years of the remaining amount). This brings your total first year deduction to $30,000. By doing this, it will give you a cash savings of $10,500 ($30,000 x 35% cash rate). In the end your $50,000 purchase or lease of new or used equipment and software will actually only cost you $39,500 after tax, assuming a 35% tax bracket. As you can see, the U.S. government finally has done something for the small business’ that keeps our country churning. Any equipment you purchase for your dental lab that is used for business purposes 50% of the time will qualify for the Section 179 tax savings and possibly even your delivery vehicle. You can go here to learn more about the tax code and purchasing vehicles. Section 179 is meant to motivate the American economy (and your business) to move in a positive direction. I hope you now have a better understanding of how this simple tax code can help save your lab money with any purchases you will be making. I also feel now would be a good time to remind you that we have the new Roland DWX-51D and 4W ready to be purchased!
Disclaimer: Tax codes can be tricky and can change at anytime without warning. We highly recommend talking to your accountant about your specific equipment purchases and if they qualify for the Section 179 deduction.