2023 BUSINESS TAX INFORMATION
Lower the True Cost of Ownership on Your Business Equipment
There are a number of very attractive tax benefits that are currently available that can be utilized to supplement your facilities growth.
Use this tax calculator to estimate your tax benefit for a qualified purchase for your facility.
Tax Savings Calculator - Section 179 Deduction
Please enter the cost of equipment and click 'Submit'.
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
IRS Section 179 is a permanent tax law that encourages investment. It allows smaller businesses to immediately write off the full price of qualifying asset purchases (machinery, computers, furniture and other tangible goods) rather than depreciating them over several years. Under the IRS Section 179, a taxpayer may expense up to $1,050,000 of qualified equipment placed in service in 2021 (amounts will be indexed for inflation in future years). The rules are designed for small companies, so the $1,050,000 deduction phases out when a business purchases more than $2,620,000 in one year. (Companies cannot write off more than their taxable income). Section 179 applies to new and used equipment purchases, but must be "new to the business". The asset must be purchased, it cannot be used for property inherited, gifted or leased.
Bonus Depreciation - 100% for 2023
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
Reminder: to take advantage of the 2023 tax incentives, your business equipment must be put in use by year-end. It is important for each company to contact their accountant or tax advisor to learn about the specific impact to your business and realize your true tax savings.
Interest in learning more? Contact Group Financial Services for more information. We'll provide you with a free consultation and extend finance solutions so you can acquire the business equipment you need.
Contact a Group Financial Services representative today to discuss financing your next equipment or software purchase.
Note: For complete details, or changes to the tax incentives, please visit www.irs.gov or contact the IRS helpline at: 800-829-4933