TAX SEASON 2024
Understanding the tax incentives that can drive your business forward
As a business owner, making the most of your tax savings is essential to maintaining a healthy bottom line. Two of the most powerful tools at your disposal in 2024 are the Section 179 deduction and Bonus Depreciation. These tax incentives are designed to encourage businesses to invest in new and used equipment by offering significant tax breaks, allowing you to reinvest in your business more efficiently.
Here’s what you need to know about these deductions for the 2024 tax year:
The Section 179 deduction allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. Instead of spreading the deduction over several years through depreciation, Section 179 enables you to take the entire deduction in the year the equipment is placed into service.
Deduction limit: For 2024, the maximum deduction you can claim under Section 179 is $1.22 million. This means that you can deduct up to $1.22 million worth of eligible equipment purchases in the current tax year.
Spending cap: There is a spending cap of $3.05 million on the total amount of equipment purchased. If your business purchases more than $3.05 million in equipment, the deduction limit is reduced dollar-for-dollar above this threshold.
Eligible property: Section 179 applies to a wide range of new and used equipment, including qualifying machinery, vehicles, software, and equipment. The equipment must be used for business purposes more than 50% of the time.
Placed in service date: The equipment must be purchased and placed into service by December 31, 2024, to qualify for the deduction in the 2024 tax year.
Bonus Depreciation allows businesses to deduct a significant percentage of the cost of eligible assets in the first year they are placed into service. This deduction is typically taken after the Section 179 deduction has been applied.
Depreciation percentage: For 2024, the Bonus Depreciation rate is set at 60%. This means that businesses can immediately deduct 60% of the cost of eligible new or used assets in the first year.
No spending cap: Unlike Section 179, Bonus Depreciation does not have a spending limit, making it an attractive option for businesses that are making large capital investments.
Flexibility: Businesses can choose to apply Bonus Depreciation or opt out on a class-by-class basis, providing flexibility in tax planning.
Placed in service date: The equipment must be purchased and placed into service by December 31, 2024, to qualify for the deduction in the 2024 tax year.
Businesses can use both Section 179 and Bonus Depreciation in the same tax year to maximize their deductions. Typically, Section 179 is applied first, followed by Bonus Depreciation on the remaining value of the equipment. This combination can result in substantial tax savings, especially for businesses making significant equipment purchases.
Plan purchases wisely: With the reduction of the Bonus Depreciation rate to 60%, consider the timing of your purchases. If you anticipate substantial equipment needs, acting in 2024 could secure higher deductions.
Consult a tax professional: The rules surrounding these deductions can be complex, and there may be additional considerations based on your specific business circumstances. It’s always a good idea to work with a tax advisor to ensure you’re maximizing your benefits.
The 2024 Section 179 deduction and Bonus Depreciation offer powerful incentives to invest in the equipment your business needs to thrive. By understanding the rules and limits, you can strategically plan your purchases to take full advantage of these tax breaks, reducing your tax liability and freeing up capital for future growth.
If you’re considering new equipment or software purchases in 2024, United Leasing & Finance is here to help. We offer flexible financing solutions that align with your business goals, ensuring you can take full advantage of these tax incentives. Contact us today to learn more about how we can support your equipment financing needs.
United Leasing & Finance is a customer-focused and growth-oriented leasing and finance company committed to providing custom financing solutions to businesses across the U.S. and Canada. For 60 years, United has partnered with clients to achieve mutual success from small businesses to Fortune 500 companies.
*The information contained here is for informational purposes only and not to provide tax, legal, or accounting advice. United Leasing & Finance assumes no obligation to inform readers of changes in tax laws or other changes that could affect the information here. You should always consult your tax professional before making any financial or tax decisions. The information here is not intended for and cannot be used for purposes of avoiding tax penalties that may be imposed on any taxpayer.