Take Advantage Of The Tax Code!

Business owners should know there are legal tax deductions available to your operation that can drastically reduce your business taxes which thereby reduces the total cost of an industrial generator investment. It’s called Section 179 and it can save you a lot of money on the purchase of reliable, standby power.

What is Section 179?

Section 179 allows businesses to deduct the full cost of capital assets (such as an industrial generator for backup power) immediately instead of depreciating the asset over its useful life. This means capital savings now, not later. 

First, ensure the asset is eligible. To qualify for a Section 179 deduction, the asset must be “new to you” (used, new or surplus industrial generator) and must be:

1. Tangible - physical industrial generators are tangible. Intangible assets like patents, trademarks, or copyrights do not apply.
2. Purchased - a leased asset does not qualify.
3. Asset used by more than 50% in your business - a used industrial generator investment is for business, not personal use.
4. Asset not required from a related party - your industrial generator is not meant to be used by family members but rather, your business.
5. Property cannot be obtained from related parties or inherited.

In the past, the common practice was to have a piece of equipment depreciate over its useful life. This complicates accounting while leaving money on the table. Section 179 eliminates any need to wait for the reimbursement while enabling the business to take advantage of a full purchase price refund on your corporate tax rate in the current tax year.

By making the industrial generator investment toward the end of the calendar year, Section 179 allows you to minimize the time between purchase and tax credit savings. So Q4 is an ideal time to buy and generator.

Here’s A Hypothetical Example:

A manufacturing business identifies the need for backup power and decides to purchase a used Cummins 350 kW generator. Assuming a corporate tax rate of 35% and room within the $1,160,000 Section 179 allocation ($2,890,000 for total equipment purchased), they could bring their real purchase price down from $54k to $35k – a savings of almost $19k! This would allow the business to procure the equipment at a much cheaper price than originally anticipated. 

While the business would have to pay the full $54k at purchase, they’d get the $19k as part of their income tax calculation. The business could minimize the time between purchase and tax credit by making end of year capital purchases here in Q4.  

Visit Section 179.org to enter your price and see your possible deduction. 
 

Line Item	Amount
Purchase of used 350 kW generator	$54,000
Corporate tax bracket	35%
Section 179 deduction (up to $1M)	$54,000
First year total deduction	$54,000
Cash savings (at corporate tax rate)	$18,900
Real equipment cost (after tax savings)	$35,100

Contact Generator Source to learn more about the Section 179 deduction or any questions you have on your industrial generator purchase! Call (877) 866-6895 or email Sales@GeneratorSource.com today. 

Story Summary

What is Section 179?

Section 179 is a tax deduction that allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year Instead of depreciating the asset over its useful life, businesses can deduct the entire cost immediately.

What types of industrial generators qualify for Section 179?
New, used, and surplus industrial generators qualify for the Section 179 deduction as long as they are used for business purposes more than 50% of the time generators must be tangible property that is purchased, not leased.

What is the maximum Section 179 deduction for 2024?
For the 2024 tax year, the maximum Section 179 deduction is $1,220,000. This amount is reduced dollar-for-dollar if total equipment purchases exceed $3,050,000 for the year.

When does the equipment need to be purchased and placed in service?
To qualify for the Section 179 deduction in a given tax year, the equipment must be purchased and placed in service by December 31 of that year. For example, to claim the deduction for 2024, the generator must be bought and put into use by December 31, 2024.

How much can I save on my generator purchase?
The potential tax savings depend on your tax bracket. For example, a $54,000 generator purchase could result in $18,900 in tax savings for a business in the 35% tax bracket, effectively reducing the cost to $35,100.

Can I use Section 179 if I finance my generator purchase? 
Yes, financed equipment purchases can still qualify for the Section 179 deduction as long as you are taking on the risk of ownership. This allows you to deduct the full purchase price even if you're only paying a portion of it this year.

Is there a limit on total equipment purchases?
Yes, the Section 179 deduction begins to phase out dollar-for-dollar when total equipment purchases exceed $3,050,000 for 2024.The deduction is completely eliminated when purchases reach $4,270,000.

How do I claim the Section 179 deduction?
To claim the deduction, fill out Part I of IRS Form 4562 and include it with your tax return. Consult with a tax professional to ensure you're eligible and filing correctly.
 

Brian La Rue | 10/24/2023 10:13:30 AM | 0 comments
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