Nov 27, 2013

Tax-Incentive

Pay Yourself, Not Uncle Sam

Take Advantage of the Tax Break

Section 179

Here at JMT we are doing what many business around the United Stated do every year at this time, we are starting evaluate our financials and getting ready for tax season. In the process of closing the books for the year, many business owners, like ourselves, and purchasing decision makers have an opportunity to enhance their place of operation and get a break in the meantime.

Section 179 was passed to offer businesses the ability deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or capital lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves

Here are some example calculations based on a marginal tax rate of 35%***. Make sure to consult with your tax adviser for complete information:

Equipment Cost

Monthly Payment*

Total Section 179 Tax Deduction**

Tax Estimated Savings

Total Estimated Equipment Cost after Tax Savings

$15,000 $290 $15,000 $5,250 $9,750
$25,000 $483 $25,000 $8,750 $16,250
$30,000 $580 $30,000 $10,500 $19,500
$40,000 $773 $40,000 $14,000 $26,000
$50,000 $967 $50,000 $17,500 $32,500
$75,000 $1,450 $75,000 $26,250 $48,750
$100,000 $1,933 $100,000 $35,000 $65,000
$150,000 $2,900 $150,000 $52,500 $97,500
$200,000 $3,867 $200,000 $70,000 $130,000
$250,000 $4,833 $250,000 $87,500 $162,500
$300,000 $5,800 $300,000 $105,000 $195,000
$400,000 $7,733 $400,000 $140,000 $260,000
$500,000 $9,667 $500,000 $175,000 $325,000
$600,000 $11,600 $557,145 $195,001 $404,999
$750,000 $14,500 $642,861 $22,501 $524,999
$1,000,000 $19,333 $785,723 $275,003 $724,997
$2,000,000 $38,666 $1,357,168 $475,009 $1,524,991

*On approved credit. Payments and terms subject to change.

** Total Section 179 Tax Deduction includes 179 Deduction, 50% bonus depreciation of applicable and standard reduction if applicable.

In the table above, you can see that there is a significant upfront savings on your purchase. In fact, this deduction alone allows you to literally keep the first 18 months of equipment cost in your pocket. For example, if you purchase a $100,000 machine and the payment is $1933.30 a month, take the tax savings of $35000 you would receive this year and divide it by the monthly payment, you come up with just over 18 months. ($3500 (tax saving) / $1933.30 (monthly payment) = 18.1 months). That right 18 months are essentially an opportunity to reserve cash flow that could be used to play off the machine or make other enhancements to your business for continued growth if you take the tax savings option.

Here at JMT we are committed to helping you obtain the most cost effective and useful equipment for your manufacturing process. Give us a call if you would like more information on Section 179 or to check out our huge inventory, at 855-773-7727.

You can also check out the Quick Turn Calculator at: http://qtfinancial.com/tax-savings-calculator.html

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