Tax Advantages on the Purchase of New & Used Equipment

December 19, 2016

 

With the end of 2016 quickly approaching, it’s important to review the many tax benefits related to bonus depreciation and Section 179 available in the coming years. There are two key tax benefits to keep in mind:

 

1. Section 179 provides the allowable deduction limit of $500,000 on the cost of new and used capital equipment purchased with an investment cap of $2,000,000.

 

Example:

NEW/USED EQUIPMENT TAX YEAR
Cost of Annual Equipment Purchase $560,000
Section 179 Deduction $500,000
Tax Rate 33%
Tax Savings Using Section 179 $500,000 x .33 = $165,000

 

2. Bonus depreciation can be combined with the Section 179 deduction for additional savings. Bonus depreciation enables you to take additional depreciation on new capital equipment purchases only.

 

This chart can help to explain:

PLACED IN SERVICE DATE BONUS DEPRECIATIONS
January 1, 2016 to December 31, 2017 50%
January 1, 2018 to December 31, 2018 40%
January 1, 2019 to December 31, 2019 30%

 

With or without Section 179 and bonus depreciation, your tax savings over the depreciable life of the equipment will be the same. However, the purpose of the tax benefit is to create movement in the economy right now. The money you save in the shirt term can be reinvested in capital improvement, expansion projects, and more. Take advantage of these tax savings and buy the new equipment you need today.

 

Remember, the information stated above is provided as a customer service by your John Deere dealer and John Deere Financial. However, it should not be construed as tax advice. We strongly recommend that you consult with your tax advisor regarding how these tax-saving opportunities apply in your situation.

 

Source: John Deere Financial