No one likes paying taxes, right? Section 179, a piece of legislation aimed at assisting small to medium-sized businesses, is a great way to limit tax liability this year. Today’s short post will explain how Section 179 works for screen printers and how a screen printing shop can take advantage of this helpful deduction!RELATED: Screen printing press, Exposure unit, Washout booth, Conveyor dryer, Flash dryer
WHAT IS SECTION 179
It's a tax code that allows businesses to deduct the full price of qualifying equipment and/or software purchased or financed during the tax year. Essentially, Section 179 lets you deduct the full price of the purchased equipment from your gross income.
In the past, businesses that bought qualified equipment could write off a little through depreciation. Section179.org lays out a simple example: say your business spent $50k on a machine. You would write off about $10k each year over five years. With Section 179, you can write off the entire purchase price for the year that you bought it in. The tax code allows you to reduce your taxable income and create tax savings.
Why in the world did the US government set up this tax code? They created it to incentivize business owners to invest in themselves. That's it. It's pretty rad.
Photo by Symmetree.
Section 179 has six categories that highlight what qualifies for the deduction — tangible personal property, other tangible property, storage facilities, single-purpose agricultural or horticultural structure, off-the-shelf computer software, and qualified real property. What does that mean for you? If you purchased a new press, exposure unit, washout booth, conveyor dryer, flash dryer, etc, you can write it off!
Plus, the tax code specifies that the equipment needs to be new to you. Whether you bought a new press off of ScreenPrinting.com or bought it used off of Craigslist, it's new to you and therefore, can be deducted.
So, how does this tax code play out? Say you bought a Riley Hopkins 250 4x1 Press this year, costing $1,295. Assuming you're in the 35% tax bracket, you'll save $453.25 (meaning the equipment would only cost ($841.75).
Say you went big this year and purchased the Entrepreneur Screen Printing Package at the price of $7,695. Assuming that same tax bracket, you'd save $2,693.25. It's wild. If you have purchased and installed new equipment this year, input your expenses into this calculator to calculate the total cost of savings.
Before you get too excited, let's go over some of the stipulations of the tax code.
Photo by Symmetree.
First off, there is a deduction limit. For 2021, the limit is $1,050,000 (it can vary year-to-year, so always double check when filing). That amount phases out dollar for dollar when $2,620,000 of assets are placed in service.
Businesses that spend more than $3,670,000 in 2021 will not qualify for Section 179.
Equipment must be invoiced and placed into use in the 2021 calendar year. Do not wait until December 31st to pull the trigger. It'll be too late.
With the current state of affairs (supply shortages, shipping constraints, etc.), it's even more important to purchase equipment as early as possible. Remember, you have to start using your equipment before 2021 ends. If you bought it in 2021 but you weren't able to receive it until 2022, you won't be able to write it off. Get the equipment you need as soon as possible.
Equipment must be paid for upfront, with a finance agreement or capital lease. All of our finance options qualify for this tax deduction.
LEARN MORE ABOUT RYONET'S FINANCING OPTIONS
The bottom line — think ahead and use Section 179 to benefit your screen printing shop. Get pre-qualified for a finance option now or talk to us about your equipment expansion needs. For any tax related questions, please speak with your tax advisor for specific details on how this program can help your business.