Friday, March 18, 2016
If manufacturers are looking to make machine investment, the time has never been better.
In December 2015, the House and Senate passed “The Protecting Americans from Tax Hikes Act of 2015” (PATH Act) into law. Two key components of this new law are the extension of the Section 179 Deduction to a permanent level of $500,000 and the extension of the 50% Bonus Depreciation through December 31, 2017.
Section 179 Deduction
This deduction is designed for small to medium-sized businesses and larger businesses who are not spending over $2 million in capital equipment per year. This deduction allows many businesses to write off the entire cost of the machinery they purchase, lease or finance in the year it is delivered.
50% Bonus Depreciation
This deduction is designed for larger businesses since there is no limit on how much one can spend per year on Capital Equipment. This deduction allows businesses to write off 50% of the entire cost of the machinery they purchase, lease or finance in the year it is delivered.
How deductions work for individuals
If one decides to spend less than $2 million on capital equipment for the calendar year, then he/she can claim the full Section 179 Deduction on the first $500,000 and the 50% Bonus Depreciation on the remaining capital equipment purchases.
If one spends over $2 million but less than $2.5 million on capital equipment for the calendar year, then he/she can claim a partial Section 179 Deduction and the 50% Bonus Depreciation on the remaining capital equipment purchases. The Section 179 Deduction phases out dollar-for-dollar for any purchases above $2 million and goes away totally if your total capital equipment purchases are above $2.5 million.
If one spends more than $2.5 million on capital equipment for the calendar year, he/she can claim just the 50% Bonus Depreciation on all capital equipment purchases.
To qualify for these deductions in 2016, equipment must be delivered by December 31, 2016.
Tags: act, bonus depreciations, deductions, machine investment, machine manufacturer
