While we all wait to see what tax reform will bring in 2018 and beyond, there’s still time to take advantage of significant tax incentives available under existing law – more specifically, the bipartisan Protecting Americans from Tax Hikes (PATH) Act of 2015. This legislation made permanent some of the then-temporary tax credits for businesses and working families – credits that can translate into significant savings for coach buyers who are ready to act now.
The PATH Act extended some changes that were set to expire at the end of 2014. One of those allowed businesses to claim a 50% first-year bonus depreciation for new assets placed in service in 2017, and made the generous Section 179 deduction rules permanent in order to stimulate the economy by accelerating capital purchases. This deduction allows the cost of qualifying new and used depreciable assets to be substantially written off in Year One. For assets placed in service in tax years beginning in 2015 and beyond, the new law maintained the maximum Section 179 deduction allowance at the generous figure of $500,000. For 2017, the indexed for inflation cap is $510,000. This deduction, combined with the first-year 50% bonus depreciation break, can lead to big tax savings for small and medium-size businesses. How big? Take a look:
New Coach Purchase of $2,000,000: A new coach purchaser can now receive the benefit of the increased small businesses deduction for the first $510,000. The Section 179 deduction is phased out $1 per $1 when the investment limit of $2,030,000 is reached. As a result, the purchaser can claim a deduction of $510,000 and then apply the 50% bonus depreciation for new equipment to the remaining $1,490,000, see explanation on reverse side. Alternatively, the purchaser can elect to apply the 50% up-front bonus depreciation deduction to the entire purchase.*
Pre-Owned Coach Purchase of $825,000: Purchasers may deduct up to the first $510,000 of the purchase price. (Bonus Depreciation does not apply to used equipment.)
The bottom line? Right now is an exceptionally good time to buy a new or pre-owned coach to be used in your business. And while there’s no indication that these incentives will be eliminated in tax reform legislation now in the works, there’s no guarantee they won’t be, either. So if you’re ready to buy, do it before December 31st – and save every dollar you’re entitled to.
You can get started by downloading our 2017 Tax Benefits Document for additional details.
*The increased §179 deduction and the 50% bonus depreciation can both apply in many situations to your business for certain new equipment costing less than $2,030,000 if acquired and placed in service this year. It might be assumed that the 50% bonus depreciation would be preferable to the §179 deduction because, unlike the §179 deduction, the bonus depreciation deduction is not limited by taxable income and might create a net operating loss (which may be carried back to prior years). Note, however, the election to take the §179 deduction may still be advisable even for property that qualifies for the 50% bonus depreciation since many states require an add back of the up-front bonus depreciation while allowing the §179 deduction in its entirety. Please consult your tax professional to determine which scenario is best for you.