Jennifer, Here Are Your Articles for Wednesday, November 16, 2016
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It Pays for Construction Companies to Know Section 179


Owners of construction companies have a variety of daily obstacles to overcome and goals to meet. They also regularly make major decisions regarding equipment and machinery investments. Such purchases can make or break a construction firm, so these decisions are not taken lightly.

A taxpayer may elect to expense the cost of any section 179 property and deduct it in the year the property is placed in service. The TCJA increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million. For taxable years beginning after 2018, these amounts of $1 million and $2.5 million will be adjusted for inflation. This can really make a difference to your bottom line at the end of the year, ending the uncertainty about whether the exemption would be available and how much it would be, which previously made it very difficult to plan large purchases.

The Section 179 exemption saves money on capital expenses, leading to increased savings, higher profit margins and greater overall success. You'll be able to make crucial investments on the equipment, machinery, tools and technology necessary to grow your business and expand into new markets. Consider it a financial boon to construction firms.

By taking advantage of Section 179 exemptions, construction business owners can begin identifying new equipment needs, itemizing new models and consulting with professional advisers. Deducting a half million dollars can make a world of difference for a small construction business that needs to grow, a surefire way to stay competitive in an increasingly disruptive industry.

Working without the best tools available can leave a construction firm scrambling to keep up with industry peers. But now tools and equipment that might have been out of reach for smaller enterprises are much more accessible, and the deduction works with leased equipment as well. This can provide additional benefits in allowing companies to stay up to date on technology and to reduce the depreciation levels of leased machinery.

For construction companies, the deduction should help account for the rising expense of labor in light of the skilled worker shortage and can contribute to training employees.

The bottom line: The roller-coaster ride of the past few years is over. The tax deduction limit is permanent. And almost all types of business equipment qualify for the deduction, including the following:

  • Large manufacturing tools and equipment.
  • Tangible personal property used in business.
  • Business vehicles with a gross vehicle weight in excess of 6,000 lbs.
  • Computers.
  • Off-the-shelf software.
  • Office furniture.

But there are limits to what's considered a capital expense. You cannot write off the following:

  • The purchase of land.
  • The purchase of buildings.
  • Intangible property — copyrights, patents, or any expense to procure such items, including the cost to file or the attorneys' fees paid to prepare filings.

There are a lot of complexities in Section 179. If you want to know exactly how you can take advantage of it, give us a call.


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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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