If you run a small business - or want to start running a small business - taxes are always an important challenge to consider. You have to know where you can take tax breaks and where they don’t fit your organization.
What many small CNC business owners don’t realize is the value of Section 179, and that Tormach machines, even though they are inexpensive, qualify as capital equipment.
Section 179 Explained
Before Section 179 came into effect, businesses had to write off equipment purchases through depreciation. That meant that if you spent $30,000 on a machine this year, you would write off how much that machine depreciated each year following.
With Section 179, businesses can write off the entire purchase price of qualifying equipment for the current tax year, so long as that machine is delivered and installed on or before December 31, 2021.
Essentially, this is like giving you money back for buying a machine!
The Rules of Section 179
Like any legal or tax related topic, consult a professional before assuming any of this applies to you and your business. That being said, Section 179 says that any equipment bought and put into service before the end of the year (up to $1,050,000.00), can be written off on your 2021 taxes.
Here are the key rules of the deduction:
- Your machine must be delivered and put into service by December 31, 2021
- Your business needs to have a minimum level of pre-tax income.
- You can’t write off more than $1,050,000.00
Here’s the breakdown of what the numbers would look like:
Financed Machines Still Qualify
Tormach partner, Geneva Capital, just added new financing opportunities like $0 down or no payments for 90 days financing for businesses that are purchasing machines. That means you can buy the Tormach machine that you need to add capabilities to your business, and get the tax deduction for the full cost of your equipment purchases, dollar for dollar against your income, as long as it is put into service this year.
You can start making chips and making money, while also saving on taxes, before spending a dime of capital on the machine!
Keep in mind that your machine needs to be making parts before the end of the year to qualify for Section 179, so current supply chain challenges need to be taken into consideration.
*These general numbers are based on Section 179 documentation, and can not be used as a quote. For more information, visit Section179.org or contact your tax professional.