If you’re a US company, you might already know about a U.S. tax deduction called Section 179. This tax benefit means you can deduct the full purchase price of qualifying equipment within the year it’s purchased, instead of writing off small amounts over many years. The deduction limit is US$1,160,000 if you purchase $2.89 million or less of trucks or equipment.
Furthermore, you can combine this with Ritchie Bros Financial Services’ offer of 90 days no payment*, meaning you can buy now, get the full taxable benefit in 2023, and delay paying anything until 2024.
What is the Section 179 deduction?
Section 179 of the IRS Tax Code lets a business deduct the full purchase price of qualifying equipment within the year it’s purchased instead of writing off small amounts over many years. Here are some key points to know about Section 179. Equipment must:
- Be within the specified dollar limits of Section 179. For 2023, the deduction limit is US$1,160,000 if you purchase $2.89 million or less of trucks or equipment.
- Be placed into service in the same year the deduction is being taken. For 2023, buyers must purchase the equipment AND start using it for their business by December 31, 2023.
- Purchased and used for business. Simply put, it’s got to be used for the buyer’s business. A motorcycle probably won’t qualify, but a dozer bought at auction most likely will.
- Be purchased and used for business more than 50% of the time. So, unless you plan on using your dozer for recreational use. you should be fine!
Bonus depreciation, which is generally taken after the Section 179 spending cap is reached, will begin to phase down in 2023 at which point it will only be offered at 80%. For example, a $100,000 piece of used equipment would get $80,000 of bonus depreciation in 2023 with $20,000 being depreciated over a seven-year period.
Combining PurchaseFlex™ Financing with Section 179 could save you thousands this year.
When it comes to financing and leasing, this is where Section 179 gets really powerful: the amount you save in taxes by deducting the full purchase price may end up being larger than the sum of loan or lease payments you make this year..
Right now, Ritchie Bros. Financial Services is offering PurchaseFlex™ Financing with no payments for 90 days* – meaning you could pay nothing in 2023, but could get the full tax deduction this year.
That’s a direct, positive impact on your business’s profitability for 2023. Before making your final purchases of 2023, talk with Ritchie Bros. Financial Services about your purchasing needs and let them know you’re interested in making a Section 179 deduction this year. You may be eligible for fast, no-obligation finance pre-approval and the details needed to review with your tax advisor**.
After that, all that’s left is for you to decide what to do with the money you saved.
*On approved credit.
**Ritchie Bros. is not a tax advisor. To learn specifically how your business may benefit from these tax law changes, please consult with your accountant or tax advisor. Nothing contained herein is meant to be, nor should it be considered, a guarantee as to price performance at any Ritchie Bros. unreserved auction.