2014 Tent Needs vs. Winter Cash Flow
As the economy improves, many rental companies are anticipating new tent purchases for the 2014 season. The end of this year is a great time to look at making these purchases.
Equipment financing and leasing qualifies as a purchase under the Section 179 tax code, and with changes to Section 179 possible in 2014, it might be financially advantageous for your business to purchase now rather than in the spring. Payment plan programs available at this time of year can also help manage winter cash flow challenges.
What is Section 179?
Section 179 refers to part of the US Tax Code that was designed to help stimulate the economy. It is intended to encourage business owners to purchase equipment by allowing companies to expense large amounts of purchases in a single year or over several years through “carry overs.”
The idea behind this section is to help reduce the cost of the equipment being purchased through tax benefits (tax breaks). The Section 179 code has been modified over the last several years, but for 2013 the spending limit allowed under the code is $500,000 of total equipment purchases.
The Tax Savings Can Be Big
As an example, if your company is in the 35% tax rate and you purchase an item for $50,000 utilizing Section 179, this $50,000 purchase can be deducted from your net income. This reduces your tax liability by $17,500 for the year! If you apply that savings directly toward the $50,000 purchase, the equipment actually cost you only $32,500, not the original $50,000.
What About Section 179 For Next Year?
What will happen to this tax code in 2014 is currently uncertain. A recent article in Rental Pulse suggests that the current spending limits may be reduced to $25,000 in the coming year. To read this article in Rental Pulse, please click here.
You should consult your tax advisor for advice on your specific situation, but taking advantage of this tax break in 2013 can potentially save your business a lot of money and set your business up with the equipment it needs for the next season.