TAX CODE 179
So you’ve you heard of Tax Code 179 . . . but how do you really use it?
Businesses want to REDUCE INCOME TAXES
- To reduce taxes businesses either reduce revenues or increase expenses
- It is unlikely that businesses want to reduce revenues… So increasing expenses is the logical option
- BUT, how does a business increase expenses but not use any of their cash?
- Depreciation is how….Tax Code 179 is just using depreciation more effectively
- Tax Code 179 allows a business to fully depreciate (i.e. expense) the cost of the equipment/software in the year they purchase it
- Depreciation is the expense a business takes for purchasing and using equipment/software
- Depreciation is one of those rare expenses that DOES NOT require a business to use money from their bank account
- Normal expenses like payroll, insurance and rent are paid with actual cash out of the business’ bank account
Tax Code 179 REDUCES the effective COST of the Equipment/Software (an example)
- Equipment/Software Quote = $25,000
- Practice’s Estimated Tax Rate= 21%
- $25,000 * 21% = $5,250 in 2018 income tax savings
- Therefore, a $25,000 piece of equipment less the tax savings of $5,250 equals net project cost of $19,750. You have just shown the practice how to save $$.
Owners can EARN MORE CASH in 2019
- Your customer purchases from you in 2019
- Your customer finances the equipment/software through GSG
- GSG requires NO $$ down and defers the start of the business’ payments until 2019
- Taking the Tax Code 179 Tax Deduction Now with No Money out of pocket for the purchase of the equipment/software in 2019 means….
- Owners can take the extra $5,250 in cash (tax savings from example above) out of the business in form of extra bonuses or pay. They make more MONEY.
Use It or Lose It
- Tax Code 179 is available to businesses every year, however, it does not rollover
- 2019 Tax Code 179 Limit: $1,000,000
- 2020 Tax Code 179 Limit: $1,000,000
*Any financing structure would be subject to credit approval
Bill Steuer & Todd Greenberg
GSG Capital, LLC