Thinking about pushing your buying decisions into 2023? Consider the benefits of receiving this year’s bonus tax depreciation if you purchase a truck before year-end.
The Tax Cuts and Jobs Act, signed in 2017, greatly enhanced bonus depreciation opportunities available to businesses in the market to buy equipment. While taxpayers may continue to expense qualifying equipment under IRC Section 179, this is the last year that taxpayers can elect a 100% bonus depreciation deduction under Section 168(k). In future years, bonus depreciation under 168(k) will decrease by 20% each year starting at 80% in 2023.
Under 168(k), the deduction applies to both new and used equipment and there is no dollar limit on the amount of property that you purchase that can qualify for bonus depreciation. The 2022 Section 179 deduction limit for businesses is $1,080,000 (a $30,000 increase from 2021). Businesses can deduct the full price of qualified equipment with a "total equipment purchase" limit of $2.7 million.
Section 179 allows a business to write off the entirety of an asset’s value for the year of initial use as an expense rather than as an asset. This allows the business owner to frontload the tax savings, reduce income taxes for the year and effectively reduce the cost of purchase. When your combine your tax savings from Section 179 with financing through MHC Financial Services, your business can effectively budget growing your fleet, as well as:
- Maximize your cash flow
- Keep more cash and lines of credit open for future growth and unforeseen expenses
- Budget your monthly equipment expenses
- Accelerate your income tax benefits
Start the process now
The sooner you start the bonus depreciation process, the more likely you can use the opportunity to keep cash in your business and avoid equipment not being available when you need it.
Contact MHC Financial Services for more information. To learn more about the bonus depreciation laws, visit: https://www.irs.gov/newsroom/additional-first-year-depreciation-deduction-bonus-faq.
This summary was written to support the promotion or marketing of the matter addressed above and is not tax advice provided by Murphy-Hoffman Company or MHC Kenworth. The taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.