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How U.S.-based companies may benefit from the new Section 179 deduction limit and Bonus Depreciation increase

Posted by IronPlanet on Nov 8, 2018 1:07:21 PM

If you’re a U.S.-based business, you might know about a U.S. tax deduction called Section 179. It’s been approved for the 2018 tax year ­– and the deduction limit has been increased to $1,000,000 for 2018. That’s double the deduction limit compared to last year. And it now applies to the purchase of used equipment, too.

It’s good news for both buyers and sellers. If you’re thinking of selling, this could be the right time. Buyers looking to capture the increased tax savings Section 179 offers will be motivated to complete their purchases by the end of 2018, meaning a likely increase in demand and strong pricing for used equipment. Here’s a deeper look at Section 179.

What is the Section 179 deduction?

Section 179 of the IRS Tax Code lets a business deduct the full purchase price of qualifying equipment within the year it’s purchased instead of writing off small amounts over many years. Here are some key points to know about Section 179. Equipment must:

  • Be within the specified dollar limits of Section 179.
    For 2018, the deduction limit is US$1,000,000 if you purchase $2.5 million or less of trucks or equipment.
  • Be placed into service in the same year the deduction is being taken.
    For 2018, buyers must purchase the equipment AND start using it for their business by December 31, 2018.
  • Purchased and used for business.
    Simply put, it’s got to be used for the buyer’s business. A motorcycle probably won’t qualify, but a dozer bought at auction most likely will.

Section 179 deductions can be used for both new and used equipment. That’s what makes this deduction a perfect match for buyers looking to pick up used trucks and equipment at a Ritchie Bros. auction, and sellers looking to capitalize on the presumed increased demand*.

Temporary 100 per cent expensing for certain business assets (first-year bonus depreciation) 

Related changes to the Tax Cuts and Jobs Act also increases the bonus depreciation percentage from 50 percent to 100 percent for qualified property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023.

The definition of property eligible for 100 percent bonus depreciation was also expanded to include used qualified property acquired and placed in service after Sept. 27, 2017*. 

How these tax law changes can help you capitalize on a ‘sellers’ market’.

Thanks to these tax law changes, there is likely going to be increased pressure on buyer demand and presumably higher resale values for used equipment. That has the potential to create a “sellers’ market” between now and end of year. Talk to us today about selling your equipment and capitalizing on this window of opportunity. 

IronPlanet and Ritchie Bros. offer multiple solutions to sell – our live auctions, weekly online events on IronPlanet and a daily online marketplace at Marketplace-E. Talk to us about your needs and we can help you choose the best option.     

And for a limited time, first-time sellers receive 50% off of our commission (up to a maximum of $1000).

How to sell

  * IronPlanet is not a tax advisor. To learn specifically how your business may benefit from these tax law changes, please consult with your accountant or tax advisor. Nothing contained herein is meant to be, nor should it be considered, a guarantee as to price performance at any IronPlanet auction.

Topics: usa

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