For manufacturers, distribution centers, fulfillment centers, and the like, using forklifts are what keeps the world and their businesses moving. However, equipping operations with the proper tools to be successful can be expensive. From purchasing heavy machinery to maintaining multiple pieces of equipment, costs can begin to add up. To stay ahead of the competition, businesses must keep operating. And to continue to grow, one must take advantage of every savings opportunity available. This includes tax write-offs that businesses should be aware of before the end of the year that can aide in substantial savings. Below we review a specific tax advantage for companies who purchase forklifts for their operation that can ultimately save owners thousands of dollars.
Section 179 Tax Benefit
The Section 179 tax benefit was created to help and incentivize smaller business owners to invest in themselves by purchasing equipment for their business. However, the benefit is also available to all businesses that can qualify. Section 179 Tax Benefit enables businesses to write-off the full amount of the purchase price for qualifying equipment from your gross income for the current tax year. For 2020, this means any qualifying equipment that has been purchased or financed and put into use between January 1, 2020 – December 31, 2020.
Caps to the 179 Tax Benefit
There are a few stipulations to the tax benefit. For 2020, the cap for the total amount written off is $1,040,000 if the total amount of purchased equipment does not surpass $2,590,000. For small businesses, this means the whole qualifying purchase up to $1,040,000 can be written off for 2020! As soon as the total purchase amount is exceeded ($2,590,000) the Section 179 tax benefit will phase out and the whole deduction will go away once $3,630,000 in equipment purchases is attained.
Additional Bonus Depreciation may be Available
Bonus Depreciation is not available every year but IS AVAILABLE for 2020. If you are a larger business and you have met or exceeded the tax liability threshold ($2,590,000) the Bonus Depreciation can be very beneficial. This bonus depreciation is at 100% and applies to NEW and USED equipment purchased or financed during the 2020 calendar year.
For a quick recap of potential Tax Benefits:
Deduction Limit on new/used equipment in 2020
Spending Cap on equipment purchased/financed in 2020
- 100% for 2020
Businesses can see huge savings on their bottom line by taking advantage of the Section 179 Tax Benefit. This tool can help businesses, especially smaller corporations, grow their organization. See the example below for potential savings:
|Example of Section 179 Tax Benefits for 2020 |
|Write-off for Year 1||$1,040,000|
|Section 179 Deduction||$35,000|
|Total 1st Year Deduction||$35,000|
|Cash Savings on your purchase (based on 35% tax bracket)||$24,500|
That’s $24,500 in equipment savings!
To calculate your estimated savings, click the Calculator. For guidance on your specific tax benefits, please contact your tax advisor.