Lease Financing – The Section 179 Deduction
NEWS ALERT: SECTION 179 IS $500,000 FOR 2016
Jan 1, 2016: The “Protecting Americans from Tax Hikes Act of 2015” (PATH Act) was passed by both the House and Senate and signed into law on 12/18/2015. This bill expanded the Section 179 deduction limit to $500,000. Read the summary from the Ways and Means committee here.
Section 179 Deduction: Until further notice, Section 179 is permanent at the $500,000 level. Businesses exceeding a total of $2 million of purchases in qualifying equipment have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million. Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.
50% Bonus Depreciation: will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.
IMPORTANT – Section 179 for Current 2016 Tax Year (This Year): Section 179 can provide you with significant tax relief for this 2016 tax year, but equipment and software must be financed and in place by midnight December 31, 2016. Use this 2016 Section 179 Calculator to see how much the Section 179 tax deduction can save your company.
1. What is a Section 179 Deduction?
Section 179 of the tax code allows businesses to deduct the entire cost of GPS tracking system property on their income taxes as an expense in the year acquired rather than capitalizing and depreciating it over time. This property, other than real estate, is generally limited to personal property that is used in business and trade.
2. How Does a Section 179 Deduction Work?
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of GPS tracking system equipment purchased or financed during the tax year. That means that if you buy or lease a piece of GPS fleet tracking equipment, you can deduct the FULL PURCHASE PRICE from your gross income. This incentive was created by the US Government to encourage businesses to buy or lease GPS tracking equipment and invest the money into their businesses.
3. How Much is a Section 179 Deduction?
2013 and 2012 Deduction Limit = $500,000 This is good on new and used equipment, as well as off-the-shelf software. 2013 and 2012 Limit on equipment purchases = $2,000,000 This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced. Bonus Depreciation = 50% This is taken after the $2 million limit in capital equipment purchases is reached. Note: Bonus Depreciation is available for new equipment only. Bonus Depreciation can also be taken by businesses that will have net operating losses in 2013. The above is an overall, “simplified” view of the Section 179 Deduction for 2013. For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please follow this link and read the entire website carefully. GPS Tracking System Section 179 Tax Benefits
4. Benefits of a Non-Tax/Capital Lease:
Business owners who acquire GPS fleet tracking equipment for their business usually prefer to deduct the cost in a single tax year, rather than a little at a time over a number of years. This deduction is known by its section in the tax code, a Section 179 deduction. Under Section 179, businesses that spend less than $2 million a year on qualified GPS tracking and fleet management tracking system equipment, may write-off up to $500.000 in 2013. The rules are designed for small companies, so the $500,000 deduction phases out when a business purchases more than $2 million in one year. (Companies cannot write off more than their taxable income).
5. Is Leased Equipment Eligible For Section 179 Deductions?
Yes, GPS tracking equipment leased under a capital lease structure is eligible for Section 179 deductions. Examples of capital leases are leases with a fixed purchase option like a $1.00 buyout or PUT (Purchase Upon termination), which is pre-stated purchase option expressed as a percentage of the property’s original purchase price. Businesses may find that the lease payments in the first year are less than the tax benefits created through the Section 179 deduction, so that the initial tax saving is greater than the lease payments made to the lessor. For additional information or to get started with a Section 179 Deduction you can contact EasyTracGPS and have our lease finance partner, Vestige Finance, guide you thru the process.
6. What are the Steps to Leasing Geo-Trax™ GPS Tracking Equipment?
For companies in business for more than three years and who are interested in financing more than $20,000 in new GPS tracking equipment and services, here are the simple steps you need to follow:
- Complete and submit the Secure Lease Application for your Geo-Trax™ GPS tracking devices.
- Credit is evaluated by EasyTracGPS’ finance partner, Vestige Finance, and upon credit approval, your lease agreement is generated.
- Upon EasyTrac’s receipt of all necessary paperwork in satisfactory form and condition, purchase orders will be issued and executed.
- The 1st lease payment is made when your new GPS fleet tracking equipment is delivered and installed, accepted by you (lessee), and invoiced by EasyTracGPS.