In Service for over 45+ yrs
If you've been thinking about a business equipment purchase, now is arguably the smartest time to do so. There are two HUGE reasons to expedite purchasing this year:
Let's dive in a little further to explore each method of saving, how to set up financing to get the most bang for your buck, and how much you could save come tax time.
Minimize Cash Out of Pocket
It's no secret that 2022 has brought with it historic inflation rates. To help mitigate the rapid rise in inflation, the cost to borrow money has risen. This economy has made it tougher for small businesses to justify (or feel comfortable) making large purchases. There are two ways for you to save those hard-earned dollars:
Lock in today's pricing
Prices are expected to continue their rise with inflation, cost of transport, and demand. The new year is also when many manufacturers raise retail pricing. By making a purchase before year-end, you may be able to save a good chunk of change.
Lock in today's payments
Lenders (like Geneva Capital) have great options for deferred or reduced payments. Many times, you won't have to make a significant investment until your equipment is in-house and generating revenue! (And your regular payment amount won't fluctuate with the Fed...it'll remain consistent throughout the length of your term.) Here is our current finance offer, but remember...we can always tailor a payment plan to fit your unique needs.
Accelerate Tax Savings
You may not be thinking about year-end tax planning yet. However, with ongoing supply chain issues, it's crucial to start thinking about equipment acquisitions now. By planning ahead, you'll be in good position to maximize potential tax savings...specifically via Section 179 accelerated depreciation.
With Section 179, you may be able to deduct the entire amount you paid for an item this year instead of depreciating it over several years.
Check it out:
Internal Revenue Code Section 179 generally allows companies to deduct the full cost of certain equipment in the year it's placed in service. This results in immediate tax savings for the business.
Stick with me through this calculation: A machine shop purchases a $50,000 CNC machine this year and elects to deduct the full amount via Section 179. Assuming a 30% marginal tax rate (federal + state), the company will reduce its 2022 income tax by $15,000 ($50,000 x 30%).
Therefore, the net cost to the company is only $35,000 ($50,000 - $15,000 savings)!*
The cool part is that a business doesn't need to pay cash for the equipment to take advantage of Section 179! The machine shop in the example above could finance the purchase of the CNC machine via capital lease or loan and still take the deduction.
They'd get new equipment to grow their business along with:
The kicker is that equipment must be purchased and put into use by December 31 to qualify for the deduction. If you're planning to take advantage of Section 179 this year, make sure to start the acquisition process soon! With ongoing supply chain issues, it can often take several months for equipment to deliver and install.
Note: There are some limitations on Section 179 to be aware of. We've listed a few at the bottom of this article.
We can structure financing as a Capital Lease (e.g. $1 purchase option) or as an Equipment Finance Agreement (EFA) in order to qualify for the Section 179 deduction. Talk to one of our Geneva Capital Sales representatives to discuss which option works best for you.
Tip: Keep in mind that everyone's tax situation is unique. We can lay some options out for you, but it's important to discuss topics like Section 179 with your tax advisor prior to making any final decisions.
That depends on a few factors, but this savings calculator can give you a good idea!
Tax savings don't have to be taxing. Hopefully we left you with a clearer view of your options and some food for thought. When it comes time to grow your business, we'll be here.
Written by Paul W
Paul worked in public accounting for nearly 10 years before joining Geneva Capital in 2003. As CFO, he oversees the company's accounting and tax departments. His responsibilities include financial reporting, budgeting, tax planning/compliance, and capital formation. As a CPA, he follows the ever-changing tax and accounting rules, especially those that impact Geneva Capital and its customers