With the end of the year approaching, it's time to think about taxes again. While tax planning might not be the most exciting part of your job, with the right strategies in place, you can keep a lot more of the money your company brings in. Without proper planning, taxes can be your biggest expense, so start planning now!
And 2018 is a prime year for tax savings.
To spur small business growth, the IRS has offered generous tax deductions for business equipment purchases over the last few years. In the wake of Trump's Tax Cut and Jobs Act (TCJA), these deductions are now much more generous.
Under the new provisions, you can deduct a lot more from your taxable income for business equipment purchases. Such deductions were previously available under Section 179 of the IRS Code and through bonus depreciation, but the TCJA has significantly increased these deductions.
With these increases, 2018 is a prime time to purchase business equipment. In most cases, you'll be able to write off the total cost of all equipment purchases. However, you only have a few more months to take advantage of these deductions, so act now.
Section 179 allows you to deduct the entire amount you pay for qualified business equipment in a single year, rather than having to depreciate it over several years. Most tangible goods used for business purposes, including computers, furniture, and even certain business vehicles, will qualify.
To take advantage of the deduction, the item must be purchased and put into use during the 2018 calendar year, and it must be used more than 50 percent of the time for business purposes. Prior to the TCJA, the Section 179 deduction was capped at $500,000, but the TCJA increases this cap to $1 million.
This means that if you buy or finance a piece of equipment in 2018, you can deduct the full purchase price from your gross income up to $1 million. You cannot, however, deduct more than your net taxable business income for the year.
In addition to the $1-million tax write-off cap, equipment purchases for the year are capped at $2.5 million. Once you spend $2.5 million, the deduction is phased out on a dollar-for-dollar basis, so the entire deduction phases out once your equipment purchases reach $3.5 million.
If you're making major equipment or purchases this year that exceed Second 179 deduction limits, you may also use bonus depreciation. The TCJA has increased the bonus depreciation percentage from 50 to 100 percent for 2018, so you have the potential to save big time on your tax bill by taking it.
If this is the case, get in touch with us now, so we can work with you and your CPA to ensure you are maximizing the use of all of your deductions for major purchases. Do not wait.
Because these tax-saving deductions won't last, now is the time to invest in business equipment and improvements. With the end of the year fast approaching, you can't afford to wait to begin strategizing your investments.
Meet with us as your Family Business Lawyer® to learn more about business equipment purchases and tax deduction eligibility. We can help you get the most out of these benefits, as well as minimize the total amount of your company's taxes, so you can keep more of your hard-earned money. Contact us today to get started.
We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.