Bonus Depreciation

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Bonus Depreciation

 
 

Maximize Your Returns

Two Key Tax Benefits:
  1. Section 179 provides the allowable deduction limit of $510,000 on the cost of new and used capital equipment purchased with an investment cap of $2,030,000.
    Section 179 increase is now permanent and will be indexed for inflation in future years.
  2. Bonus depreciation can be combined with the Section 179 deduction for additional savings. Bonus depreciation enables you to take additional depreciation on new capital equipment purchases only.
    Bonus depreciation expires on December 31, 2019, regardless of your fiscal year-end.
Example:
New/Used Equipment Tax Year
Cost of Annual Equipment Purchase $560,000
Section 179 Deduction $510,000
Tax Rate 33%
Tax Savings Using Section 179 $510,000 x .33 = $168,300
Example:
Placed In Service Date Bonus Depreciation
January 1, 2017 to December 31, 2017 50%
January 1, 2018 to December 31, 2018 40%
January 1, 2019 to December 31, 2019 30%
 
Let’s look at an example of the tax savings introduced by bonus depreciation, along with Section 179 for 2017.
New Equipment Tax Year 2017
Equipment Purchases $560,000
Section 179 Deduction $510,000 $510,000
Depreciable Amount $50,000
Bonus Depreciation (50% of Depreciable Amount) $25,000
Regular Depreciation (150% declining balance over 7 years) $2,679
Total First-Year Deduction $537,679
Tax Rate 33%
Total First-Year Tax Savings $177,434
 
With or without Section 179 and bonus depreciation, your tax savings over the depreciable life of the equipment will be the same. However, the purpose of this tax benefit is to create movement in the economy right now. Please note that recent tax reform proposals may provide additional tax benefits. The money you save in the short term can be reinvested in capital improvements, expansion projects, and more, so don’t wait — buy that new equipment today.
Important:
*Please be advised that Ag-Power, Inc. does not provide tax advice and strongly recommends that our customers consult with their tax adviser to see how the tax-saving opportunities from Section 179 and bonus depreciation may apply in their situation. This information was provided by John Deere Financial.
 
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