As it gets closer to the end of the year, accounting savvy manufacturers will be thinking about how to maximize their tax deduction under Section 179. Not accounting savvy? No problem. Section 179 is essentially part of tax law that allows manufacturers to write off their purchase price for qualifying equipment and/or software that they buy or finance during that tax year. Shoptech’s E2 SHOP and E2 MFG products are both qualifying software purchases.
2019 Tax Deduction Limit
The limit for 2019 is $1,000,000. This means that all software and equipment that companies purchase in 2019, that meet the qualifications, can be deducted for up to $1 million. Part of these qualifications includes new and used equipment and off-the-shelf software. To be able to take this deduction, the equipment or software must be purchased or financed and put into service between January 1, 2019 and December 31, 2019. This means that now is the time to take stock of what your shop has purchased this year.
If you have the funds and you have not met yet the deduction limit, now is the time to consider what else your shop needs. ERP Software can take some time to implement fully, so the sooner you begin the search for it, the better. ERP Software itself has excellent ROI (return on investment) and being able to take a tax deduction for it as well is the icing on the cake.
2019 Spending Cap
The spending cap for 2019 is $2,500,000. Once you go beyond the deduction limit of $1 million, the deduction starts to phase out on a dollar-for-dollar basis after the business spends $2.5 million. The deduction goes away completely after a business spends $3.5 million. The spending cap’s design makes this a true small business tax incentive. So larger businesses that spend more than $3.5 million on equipment won’t get the deduction. However, smaller businesses will likely be below this spending cap and be able to reap the benefits of Section 179.
2019 Bonus Depreciation
For this year, bonus depreciation offered is at 100%. The depreciation is not offered every tax year and isn’t always offered up to 100%. However, for 2019, it’s in full effect. In addition, the bonus depreciation is available for new and used equipment, as long as it’s a new purchase for the business.
If you’ve been waiting for the right time to get an ERP system for your shop, this is it. With the tax deduction promised by Section 179 and the ROI that any good ERP system will give you, it’s an easy financial decision to purchase an ERP system before the end of the calendar year.
For more information about Section 179, check out the Section 179 website.
Interested in learning more about what an ERP system can do for your shop?