Idaho bankers to firms: Take equipment tax break before it expires

Section 179 of the American Taxpayer Relief Act provides big deductions.

zkyle@idahostatesman.comDecember 3, 2013 

  • Section 179 breakdown

    This example, which details the savings in Section 179 tax deductions for a hypothetical company, is taken from www.section179.org.

    Equipment purchases: $650,000

    First-year write-off: $500,000

    50 percent bonus first-year depreciation ($650,000 minus $500,000 = $150,000 x 50 percent): $75,000

    Normal first-year depreciation (20 percent in each of five years on remaining amount): $15,000

    Total first-year deduction: $590,000

    Tax savings ($590,000 x 36 percent tax rate): $212,400

    Equipment cost after tax ($650,000 - $212,400): $437,600

It’s not too late for businesses to take advantage of tax breaks on equipment purchases set to expire at the end of the year.

The Section 179 deduction applies to most types of equipment costing up to $2 million. In some cases, the deductions and bonus depreciation can translate to tax savings of more than $200,000.

Todd Cooper, Wells Fargo regional business banking manager for Idaho, says Section 179 has stimulated equipment investment over the last two years, especially among midsize and large businesses.

“It’s spurred equipment investment, but there’s also a section of business owners who haven’t had a conversation with their tax advisers or business bankers about it,” Cooper says. “It’s worth having that conversation.”

Stinker Stores owner Charley Jones says Stinker buys new fuel dispensers, fuel trucks and equipment for its chain of gas stations every year, often approaching Section 179’s $2 million maximum threshold. Jones says he made sure to surpass the threshold this year to maximize the Section 179 deduction.

“It would be silly to put off any expenditure of equipment you need,” Jones says. “If I roll forward and buy more equipment in 2013 than I normally would, and then I can go light in 2014, that’s to my benefit.”

Justin Woodward, an equipment finance account executive for Zions Bank, says the deduction qualifications “get kind of convoluted” and must be considered case by base. The one absolute is that businesses must be profitable to claim the deductions.

“I’ve seen a lot of equipment loans in transportation, because businesses are always moving trucks and trailers out of the fleet,” Woodward says. “But we also see it in machine-tool shops, and possibly the construction guy who has done well and needs to upgrade a dump truck or backhoe. Even a mom-and-pop situation could take advantage.”

Zach Kyle: 377-6464, @IDS_zachkyle

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