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Section 179 Yearly Tax Deduction

What is Section 179 Tax Deduction?

Section 179 is a tax deduction that enables businesses to depreciate assets in the first year they purchased the asset. All assets must be put to use by December 31 of the 2024.

Why should I care about this tax deduction?

In 2024, your business can deduct the full cost of qualified equipment purchases, up to $1,220,000, with a “total equipment purchase” limit of $3,050,000.

Besides, you can take advantage of 60% Bonus Depreciation on the “new to you” equipment this year.

How to calculate my savings from Section 179?

Please use our equipment calculator for illustrative purposes:

What qualifies as Tax Deductible assets under Section 179?

  • Tangible property or hard assets (such as machines, equipment, furniture)
  • Single-purpose agricultural or horticultural structures
  • Storage facilities
  • Off-the-shelf computer software placed in service during the tax year

What are the requirements?

  • New or Used equipment with a total price of up to $3,050,000
  • Must be acquired for business use
  • Must be put to use before December 31st, 2024

How can I benefit from this Tax Deduction?

AFG offers financing and leasing solutions that are compatible with Section 179. Benefit from tax savings this year and pay for your equipment over time.

Get a free quote on equipment financing today.

*The information on this site is for illustrative purposes only. Please consult with a qualified tax advisor concerning your specific situation.

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How Inflation Impacts Your Business

Inflation is the subtle yet powerful economic current that can quietly erode the foundations of your business’s financial stability. While it’s most commonly analyzed from the consumer perspective, the inflationary pressure on businesses, particularly those with substantial capital investments, cannot be understated. In this article, we aim to unravel the impact of inflation on your business, providing insights to help you better navigate the ever-changing economic landscape.

What is Inflation?

At its most basic, inflation refers to the increase in the average price of goods and services over time. It results in the devaluation of a currency’s purchasing power, whereby each unit of currency procures less than before. While consumers feel this change, its effects also permeate the business world, greatly influencing the operations and strategies of companies, especially those that depend heavily on substantial physical assets.

The Impact of Inflation on Businesses

Cost of Capital: As inflation increases, so does the cost of capital. Banks and other financial institutions usually raise interest rates to combat inflation, which in turn raises the cost of borrowing for businesses. Consequently, the cost of obtaining new capital to finance equipment or other investments can increase. This makes it harder to finance growth initiatives or new equipment. And if your company has debt with variable interest rates, your repayments could increase drastically.

In anticipation of a rising inflation rate, you might start considering long-term, fixed-rate financing options. As a non-bank lender, AFG operates independently of traditional bank regulations and interest rate norms, offering you flexibility and competitive rates that could prove crucial in inflationary times. We invite you to explore how AFG can guide you through this process.

Equipment Costs: Companies dealing in physical assets, such as manufacturing, construction, or logistics, are significantly affected as inflation increases the cost of equipment. The price of raw materials, the cost of production, and the price of finished goods all rise, leading to an overall increase in the cost of business operations.

Cash Flow: The impact of inflation on cash flow can be significant and comes from many angles. For starters, if the business’s costs are rising due to inflation, this means that more cash is required to pay for the same level of goods and services as before. This includes everything from the electricity bill to the cost of replenishing inventories. If the company has not increased its prices (or cannot, due to competitive pressures), then more cash will be going out of the business, and less will be coming in. This can squeeze cash flow and make it more difficult to meet obligations or pursue growth opportunities.

Pricing Strategy: To keep pace with rising costs, businesses often have to increase their prices. However, doing so can be a delicate balancing act. If prices are raised too much or too quickly, it could drive customers away to competitors. On the other hand, if prices are not raised enough, the business might not cover its costs, squeezing profit margins. It’s essential to have a clear understanding of the market dynamics and the business’s cost structures to create an effective pricing strategy during inflationary times.

The Role of Equipment Financing Amidst Inflation

When inflation is on the rise, the benefits of equipment financing become even more pronounced. Here’s how AFG can help you:

Fixed Interest Rates: Equipment financing often comes with fixed interest rates, meaning the interest you pay won’t increase over the life of the loan. This provides a level of certainty and stability in your financial planning, protecting you from the ups and downs of inflation.

Manageable Costs: Equipment financing allows for the cost of equipment to be spread out over time, rather than requiring a significant upfront investment. This can be particularly beneficial in periods of inflation when preserving cash flow becomes critical.

Latest Technology: Equipment financing gives you the flexibility to access the latest technology. This can be a game-changer, especially in times of inflation, allowing businesses to improve efficiency and productivity, potentially offsetting increased operating costs.

Tax Benefits: The IRS Section 179 Deduction allows you to take the depreciation deduction for up to $1,080,000 of equipment you buy or finance in its first year. In an inflationary environment, this can provide valuable savings and help to partially offset the effect of increased costs.

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While inflation can present challenges, understanding its impact and strategically using tools like equipment financing can help mitigate its effects. At AFG, we strive to provide resources and solutions tailored to your unique circumstances, aiding you in navigating the uncertain waters of inflation. Remember, as daunting as economic changes may be, businesses equipped with knowledge and strategic tools are well-positioned to weather any storm. Reach out to us to discuss your equipment financing needs and learn how we can help you in these inflationary times.

woman small business owner stands next to local shop
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The Sound of Small Business USA

The US is and has always been built on small businesses. Did you know the SBA’s 2019 report stated there are 30.7 million small businesses in the U.S. and they make up 99.9 percent of all U.S. businesses? That’s right. They contribute not only to employment, but to innovation and the global economy. 

There are many upsides of owning a small business. There’s the flexibility and empowerment of being your own boss. There’s the possibility of financial freedom without the restrictions of working for someone else. And of course, maybe most importantly, there’s the ability to follow your own passion and do what you love.

Of course as many of us know, freedom comes with responsibilities and risk. For instance, right at the outset, 50% of all small businesses fail. Not the best odds when trying to set up a career and future. Small businesses tend to be the hardest hit during times of recession. And it’s more difficult to attract qualified employees when you might not be able to offer the same level of pay or benefits as a large corporation.

Despite the potential downsides, the good news is that the future of small business looks promising. Most of the recent studies and statistics show a future of growth and expansion, which bodes well for business owners and the US economy.

Need proof? According to a Guidant Financial and the Small Business Trends Alliance (SBTA) Small Business Trends 2021 survey:

  • 49 percent of small business owners plan to increase staff and expand or remodel their business. 
  • 55 percent will pivot with the times by investing in digital marketing 
  • 27 percent will be investing in IT infrastructure
  • 22 percent will invest in business services such as using a third-party or software to help them manage payroll, accounting, or inventory.

The fact that businesses are planning to invest right now means they see opportunities for growth and feel confident committing time and resources towards that growth. This speaks volumes especially considering we are still in the midst of a global pandemic and most small businesses have not fared well over the past year. Plus, as so many of us know, the hardest part of growing a business is cash flow management. 

The future of small business requires capital. 

But how do you secure it? Bank loans can be cumbersome and tedious, especially for small business owners. And often, they don’t provide the benefits other options do.

Also, many of the small businesses that require capital don’t qualify for traditional bank loans. The banking industry’s risk management model does little to support and encourage small entrepreneurs. 

Larger corporations tend to be more diversified and therefore can navigate growing pains more easily. Whereas a small business owner might have to mortgage a house, for example, to expand or even just to keep the business going.

Banks tend to be a poor match for a small business owner. There are however alternative methods that can help you fund your growth:

  • Equipment Leasing: Leases can provide a great way to source new equipment without having to secure a loan. Plus, you can keep the loan option available for other important projects.
  • Business Line of Credit: extremely flexible since you can continue to reuse and repay as often as you’d like, as long as your payments are on time.
  • HELOC – Home equity line of credit: Often a viable option for small businesses. It can be a bit risky as it ties your personal assets to your performance in business. While the costs are low, you have to put your personal finances on the line.
  • Pay Cash: Can you liquidate assets? Have a family member who can provide funds? If so, cash can be a great option.
  • Private Short-Term Unsecured Cash Loan: Working capital loans are easy to secure and typically no collateral is required with an alternative lender. And since they draw capital from private sources, they can be more flexible with the lending opportunities they provide.

There are many benefits of alternative lending which has led to a rise in small private finance companies in the last decade:

  • Private lenders such as AFG understand the personal risks of a small business owner and offer solutions that help the business thrive.
  • Unlike banks, most private lenders do not impose blanket liens on the business. The equipment financed is the only collateral required to guarantee the deal. No need to put family finances at risk.
  • Creative payment options and finance structures that take a company’s seasonality and downtime into account.
  • Prompt, simple process – most private lenders will make their credit decision in 24-48 hours with little paperwork (banks may take weeks reviewing financial statements).
  • Tax deductions (often, you can deduct the full cost of qualified equipment purchases).

We believe in the power and strength of small business. This country was built on it and will continue to thrive because of it. Which is why AFG does what we do. We hope our support of small business is evident in the way we structure our own processes and the way we work with our clients. We truly want what’s best for them and work hard to ensure we meet their goals every time.

If you’re a small business owner that wants to grow, reach out and learn more about your options. Let us find a solution that works best for your business.

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5 Ways for Business Owners to Reduce Their Taxable Income

The Internal Revenue Code allows for a wide variety of options to save money on taxes, encouraging entrepreneurs to create jobs and invest in thier businesses.

We do not recommend spending money for the sole purpose of reducing your taxes. However, you are likely to benefit from smart spending. Here are some popular solutions to lower your tax liabilities and save money for your business.

Tax Credits

The federal government offers tax credits and tax breaks that drive business owners to make decisions that improve the overall American economy. Actions such as hiring employees, creating an accessible environment for people with disabilities, shifting to emissions-free technologies, and even offering health coverage for employees can qualify you to save money on taxes.

Qualified Business Income (QBI) Deduction

You may qualify to deduct 20% from the QBI if your business is an S-Corp, a partnership, or a sole proprietorship. This deduction comes additionally to your regular deduction of business expenses. You could qualify if your taxable income is under $157,500. The amount goes up to $315,000 if you are filing a joint return with your spouse.

Write Off Bad Debt

Unfortunately, some customers may never pay for what they purchased on a note. The last quarter is the perfect time to identify those receivables and write them off to save money on taxes this year.

Fund a Retirement Plan (For Yourself and Employees)

Adding money to an Investment Retirement Account such as 401(k) and 403(b) free you from taxation up to a certain amount every year. The share of income put in an IRA is usually tax-free until you withdraw it. Consider consulting a tax advisor to make sure you qualify.

Section 179 and Bonus Depreciation

Business assets such as machinery, vehicles, and other equipment can qualify for a Section 179 deduction. This part of the IRS Code allows your business to write off up to $1,040,000 of the equipment cost in the first year. You can take advantage of this rule until you reach $2,590,000 for the year.

The additional bonus depreciation also offers a tax break of 50-100% on equipment cost. The current bonus depreciation rules are valid until January 1, 2023.

Please, note that you must put the newly acquired equipment in use by December 31 to take advantage of these tax benefits.

Note

Other restrictions may apply to the tax breaks explained in this article. Check if you are eligible with your tax advisor.

We Can Help

Alliance Funding Group offers equipment leasing solutions that qualify for Section 179 deduction.

Get a custom-tailored quote this year and save money on taxes.