Optimize Your Budget: End-of-Year Tax Credit for Equipment Leasing
If your business is interested in putting money back to your bottom line, read on to discover how you could save thousands of dollars on equipment purchases. If you’re on the fence about investing in and leasing new equipment for your business, let this article fill you to the brim with information about end-of-year tax credits for equipment leasing—and whet your whistle with the benefits for beverage businesses.
For craft beverage business owners, commercial printers, and other businesses in the print and packaging industry who cater to the needs of breweries, wineries, coffeehouses, and beyond, end-of-year tax credits for equipment leasing can provide the prime opportunity to invest in new equipment, enhance operational efficiency, and reduce taxable income. Read on to learn more about end-of-year tax benefits for equipment leasing and how to utilize them to help your business tap into further success.
Hidden Benefits of Equipment Leasing
Leasing equipment offers several benefits, but is perhaps most often considered because of the financial opportunity it affords. Instead of having to make a large upfront investment, leasing enables businesses to spread the cost over a period of time, which is especially beneficial for small to mid-sized businesses in helping preserve capital and maintain cash flow. Your preserved capital can then be used for other critical areas of business growth, from marketing to merchandising to hiring new talent.
Additionally, equipment leasing provides businesses with access to the latest technology without the need for substantial expenditure. As the craft beverage industry is continually evolving, having the latest equipment can provide a competitive edge, continually allowing your business to offer the most relevant services and products for your customers.
Leasing also offers greater flexibility and scalability compared to purchasing equipment outright, allowing your business to upgrade or replace leased equipment as your business grows or needs change.This adaptability ensures that your operations can scale efficiently with demand, without the financial burden of outdated or inadequate machinery.
Equipment Leasing Tip: Make sure your leasing agreements include maintenance and support services, ensuring your equipment remains in optimal condition throughout the lease term. This will reduce downtime and repair costs, and facilitate smoother operations and better overall productivity.
Understanding End-of-Year Tax Credits
One of the most significant tax benefits available to businesses is the Section 179 deduction, which allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. The IRS views equipment leasing favorably under Section 179, and the total amount of lease payments made during the year can be deducted, up to the maximum deduction limit set by the IRS.
For 2024, the Section 179 deduction limit is $1,080,000, with a phase-out threshold of $2,700,000, according to FieldEdge.com. This means that businesses can deduct up to $1,080,000 of the cost of qualifying equipment, significantly reducing their taxable income.
In addition to the Section 179 deduction, businesses can benefit from bonus depreciation, allowing for an additional deduction of a percentage of the cost of new equipment in the first year of purchase or lease. For 2024, the bonus depreciation rate is 80%, down from 100% in previous years. This is still a substantial benefit, allowing businesses to further reduce their taxable income.
Tax Credit Tip: Many states offer additional tax credits and incentives for businesses investing in new equipment. These state-specific incentives can further enhance the financial advantages of leasing equipment, but vary significantly from state to state. It is essential to research the specific benefits available in your location.
Maximizing Tax Benefits
To maximize end-of-year tax benefits, it is essential for your business to act quickly and strategically. It’s important that you professionally evaluate your business’ equipment needs, assessing current equipment and identifying any gaps or opportunities for improvement while determining which new technologies could enhance your operations and contribute to your business growth.
Before purchasing or leasing equipment, your businesses will also need to consult with a tax professional to determine the specific benefits of Section 179 and bonus depreciation for your business, alongside any state-specific tax credits that may apply.
Tax Timing Tip: In order to take advantage of end-of-year tax credits, ensure that your equipment lease agreements are finalized before December 31. This timing allows businesses to claim deductions and reduce taxable income for the current year.
Just Ask
End-of-year tax credits for equipment leasing present a valuable opportunity for businesses to optimize budgets while gaining access to the latest technology and improving operational efficiency. By leveraging Section 179 deductions, bonus depreciation, and state-specific incentives, you can significantly reduce your taxable income and invest in the growth of your business.
Millcraft is here to support you every step of the way, offering expert guidance, tailored leasing solutions, and comprehensive support services. Our team can provide detailed information on leasing terms, costs, and benefits, helping you make an informed decision. Millcraft also provides comprehensive support and maintenance services for all leased equipment, ensuring that your machinery operates at peak performance and minimizing downtime.
Expert Tip: If your business is interested in putting money back to your bottom line and you’re exploring leasing options and the best equipment for your needs, Millcraft is here. Just ask.
By: Jen W. O’Deay
Please note that this blog post is intended for general information and not intended to be professional advice. Each business situation is different and tax regulations change frequently. We strongly recommend that you consult with your tax advisor regarding the Section 179 tax deduction and how these tax-saving opportunities apply in your situation.