Everyone likes saving money. When you're a business owner, you might find yourself pinching pennies more than usual when the end of the fiscal year rolls around. With 2019's end in sight, there is one way to invest some dollars now that will save you big in the long run. If you purchase or lease a floor scrubber or sweeper for your business by the end of the year, you may qualify for Section 179 tax savings. Tax deductions for equipment purchases are a significant factor to consider as this year comes to a close. Tax planning for businesses isn't exactly fun, but it can help you find ways to afford the kind of equipment your gym or factory needs to help keep employees and clients safe.
What is Section 179?
Section 179 of the tax code allows small-to-medium businesses to take a full depreciation deduction on an asset in its first year rather than having to spread out that deduction over the item's useful life. Essentially, businesses that purchase and start using new machinery and equipment before the end of this year can deduct up to $1 million for those assets on next year’s taxes. The catch is that you have to actually start using the machine before the year's end. It's also imperative that you keep accurate records of all dates and costs associated with the purchase, including date of purchase, date you started using the machine, and all other costs (like freight and setup) associated with the purchase. Consult your CPA for details on what your specific tax scenario will look like. They will be an expert at tax planning for businesses and can give you more personalized advice about these kinds of tax deductions for equipment purchases.
Let's Talk Numbers
First of all, it's difficult to put a price on safety. Whether you're just starting out and this is the first floor sweeper or scrubber you're considering, or this is old hat and you're simply looking to replace your existing equipment, improving the safety of your business is a great reason to buy a machine now. From warehouses to gyms, things as seemingly simple as puddles of moisture or small pieces of debris can be huge liabilities. You need a way to keep important areas clean. With a new or used floor scrubber, you can not only adhere to OSHA standards but keep your floors safe and looking professional for staff and customers alike.
Since big pieces of equipment are big line items in the budget, let's do some estimating. Let's say you're looking at something that's $75,000. When you take into account your professional tax bracket and the depreciation of the item, the true cost ends up landing at around $48,750. This is an estimation based on some averages, and not at all an actual quote, but in this example, you're looking at a savings of $26,250. Since you need this equipment anyway, it seems pretty advantageous to put an extra $25,000+ in your pocket. As you can see, the Section 179 savings can be significant.
What About Leasing?
Believe it or not, you don't even have to purchase your floor scrubber or sweeper outright to take advantage of the Section 179 deduction. A non-tax capital lease lets you take full advantage of the tax savings while allowing you to make smaller payments over time. For example, we offer a $1 buyout lease on our Bulldog walk-behind auto scrubber, which is a non-tax capital lease that qualifies in most cases for the Section 179 deduction. In many scenarios, the amount you end up saving in taxes is more than the total of your first year's payments, which is why now is the perfect time to consider investing in a new floor cleaning machine for your business.
It is definitely the time to start thinking about tax deductions for equipment purchases, especially thanks to the Section 179 tax savings deduction. Tax planning for businesses can get complicated and differ from business to business, so it's essential you meet with your CPA to discuss specifics and decide on the course of action that makes the most sense for you.