Tax Code Section 179
Section 179 Example
Here is an example of a business owner using tax code section 179.
Steve is the owner of small business. Based on this years performance he is going to fall into the 35% tax bracket. If he finances or leases qualifying equipment he can deduct the whole purchase price from his gross income. Steve finances $100,000 in equipment, reducing his taxable income by $100,000 and giving him a tax savings of $35,000. Now steves after tax savings cost of equipment is $65,000. If Steve waited until next year to purchase it could have cost him $35,000 more for the same equipment.
Calculating Section 179
$100,000.00 Cost of Equipment
-35,000.00 Tax savings from depreciation (assuming 35% federal and state tax bracket)
$65,000.00 Net cost of equipment after first year
NEED EQUIPMENT NOW? DON’T WAIT UNTIL NEXT YEAR! TAKE ADVANTAGE OF YOUR SECTION 179 TAX CREDIT
Did you know? Your tax savings may exceed your finance costs on a five year “lease to own” financing plan. The total of your first-year payments are likely LESS than your tax savings!
It is time to take advantage of your Section 179 tax credit. If your deduction creates an operating loss you may even be able to carry back the loss to generate a refund from prior years. This is a big change that many business owners are not taking advantage of – and it’s a mistake! Don’t miss out on this opportunity to purchase valuable equipment at a reduced cost to you.
Lease Analysis for EFA or $1 Option
$1,976/month Equipment lease payment based on 60 months, 2 payments in advance, $1 purchase option
118,560 total payments over 5 years
-35,000.00 tax savings from depreciation
-6,496.00 tax savings from interest deduction (.35 (tax rate) * 18,560))
$77,064 net cost of equipment
Net cash flow after 12 months (excluding tax savings from interest deduction)
$35,000.00 Tax Savings
-23,712.00 Equipment Lease Payments
$11,288 Positive cash flow or 47.6% return on investment! Compare that to paying cash… -$65,000.00 Cash flow!
Don’t miss out before the end of the year, act now – apply for a lease through BNC!
BNC Finance does not give tax advice, so please check with your tax advisor to determine your savings.
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