Save With 100% Bonus Depreciation and Section 179 Expensing For 2021

Microsoft Teams image 22


As we move towards year-end, companies are looking for ways to reduce their income tax liability. One way that could significantly reduce your taxable income is to purchase gear and place it into service before year-end. Should I choose bonus depreciation or Section 179? What does place into service mean?

The Section 179 deduction is limited to taxable income and any excess is carried over to the next taxable year. In addition, the deduction is limited to $1,050,000 and phases out ratably after purchases greater than $2,620,000. Meaning a $2,620,000 purchase would net $1,050,000 section 179 deduction, whereas a $3,570,000 purchase would net $100,000 section 179 deduction, and anything $3,670,000 or greater would net zero. Click Here for a calculator that simplifies this logic.

If your cost of equipment is subject to the section 179 limitations, the remaining cost can be 100% expensed by taking bonus depreciation. You will want to look at whether your state follows Bonus or Section 179 and treat the expenditure accordingly. The characterization is made upon filing your tax return. However, making the determination now will help to accurately project your estimated tax payments that may need to be made for the 2021 tax year

Placed into Service

An important concept in securing the deduction for the 2021 year is that the equipment is placed into service before year-end. What does that mean? It means that the equipment is ready and available for its intended function which equates to taking delivery into your yard or job site. If this requirement is not met, then the deduction would be claimed in the 2022 year.

If you are evaluating the taxable impact of a potential equipment purchase don’t hesitate to ask your sales rep to put you in touch with the Bigge tax team.

*Bigge Crane and Rigging, Co. and its affiliates do not provide tax advice. This material has been provided for informational purposes only. You should consult with your tax professional prior to entering a decision with the information contained herein.

Have Feedback?