It can be challenging to make sense of how tax rules can help your business grow. You should talk with your tax advisor regarding your specific situation but I want to give some valuable insight on a way to invest more in your business this year.
Over the past few years, the Section 179 deduction and Bonus Depreciation has become very beneficial to small businesses. Before the recent changes, most people would use straight-line depreciation to write-off the purchase over multiple years. This meant that if you spent $50,000 on new assets, you would write-off, let’s say, $10,000 for five years. This would limit your current investment in your business and not allow you to grow when you need it most, now!
Using the Section 179 deduction, a business can write off the entire price of the qualifying purchase in the year the purchase is made and the equipment is put into use. This is fantastic for purchasing Mastercam and Verisurf software because the software is immediately delivered and put into service upon purchase.
Bonus Depreciation is another avenue for savings. It isn’t offered every year, but for 2019 it’s being offered at 100%. In the past only new equipment qualified, but the most recent tax laws that were passed allowing for both new and used equipment (newly purchased by you). Bonus Depreciation helps larger businesses with spending that exceeds the Section 179 limits. Businesses with a net loss are still qualified for a portion of the cost of new equipment and carry-forward the loss.
Why is Software a Good Candidate for Bonus Depreciation?
Current rules around Bonus depreciation can allow companies to fuel their growth and achieve long term goals. Software is one of the quickest ways to implement improvements, especially in the manufacturing environment.
- Software does not have long lead times so it can be purchased and put into service by the end of the current year.
- Software has the ability to eliminate waste at all levels of a company, which can turn into increased profit.
- Software can improve efficiency, so more expensive equipment purchases can be postponed until absolutely necessary, which will save cash resources for faster growth.
- Software and related training are recognized as a qualified purchase for use of Bonus Depreciation or Section 179!
What are the limits?
Beginning January 1st, 2019, property purchased and placed in service can be applied to the maximum deduction of $1 million on the first $2.5 million of asset purchases. This is phased out on purchases over $2.5 million.
The deduction applies to new or used assets purchased including financed/leased acquisitions. A QTE representative can discuss financing options that are available for Mastercam and Verisurf purchases. Considering the added benefit of managing cashflow at the end of the year can help you invest where you need it most.
To say this simply, you can purchase a software package and related training and deduct the entire amount for tax purposes this year, even if you finance the purchase. This enables your company to invest in its growth without using up cash resources.
Applying the savings to a Mastercam or Verisurf Purchase
Start by contacting QTE Manufacturing Solutions at 877-429-5708 to discuss your needs with an industry expert. They will guide you to a solution to fit your needs and help you take advantage of these savings for 2019. You will also want to discuss your specific tax situation with your tax accountant.
Tax and economic stimulus acts change yearly so stay up to date on the current opportunities for your business. Here are some useful links to help you learn more.