The “Tax Cuts and Jobs Act,” signed into law in 2017, provides two opportunities for businesses to maximize their deduction and get more from their machinery investment.
Deduction Option 1: Section 179. Designed for businesses that are not investing more than $2.5 million in capital equipment per year, this deduction allows many businesses to write off the entire cost of the machinery they purchase, lease or finance in the year it is delivered, up to $1,000,000.
Deduction Option 2: Bonus Depreciation. Designed for businesses investing in more than $2.5 million in capital equipment, as there is no limit on this deduction. Businesses can write off 100 percent of the cost of the machinery they purchase, lease or finance in the year it is delivered. This deduction expires after 2022.
What Purchases Qualify For These Deductions? Any of the following items that have been purchased or leased on a $1.00 buyout lease: New and used machinery; Tangible personal property used in business; Computers and off-the-shelf software; Office furniture and fixtures.
To qualify for these deductions in 2020, equipment must be delivered by December 31, 2020.