Businesses need every advantage to succeed, and some of the biggest they can get are tax incentives. These are given to businesses of all kinds, with the idea that helping them save money will let them grow and create jobs. Some of the recent tax incentives for businesses are those for packaging equipment. In 2013, there have been two important tax breaks specifically designed for packaging equipment. Companies purchasing new equipment in 2013, or those having recently purchased equipment, can take advantage of tax breaks that will help increase the value of their equipment. The laws, part of the American Taxpayer Relief Act of 2012, became effective January 2, 2013 and have proven to be popular with companies.
Benefits for New Purchases
The first tax break involves companies purchasing new equipment. Contained in section 179 of the IRS Tax Code, it allows up to a $500,000 deduction on new and used equipment purchased in 2013. With the previous deduction being only $139,000 this represents an increase of over 350% of what has previously been allowed. However, there are two stipulations. First, the deduction is phased out dollar-for-dollar once a business purchases $2 million of equipment. Once a company reaches its limit, the tax deduction is no longer available for that tax year. Companies are also not allowed to use the deduction to create a net loss, with the idea that small and mid-sized companies will save enough money to allow them to make investments they otherwise would have put off until the following year.
The second tax break allows for an immediate 50% depreciation on new equipment, such as an automatic packaging machine, that a company puts into production by December 31, 2013. Because this bonus depreciation doesn’t cap the total investment, there is no phasing out of the deduction. This lets businesses make large capital investments, helping them increase production and create jobs. Companies are allowed to take advantage of both tax breaks, with most of them taking the Section 179 deduction followed by the bonus depreciation benefit.
Additional Benefits to Companies
Companies who use these tax breaks can enjoy additional benefits. Those looking at long-term expansion or upgrading to an automatic packaging machine will benefit, as will companies looking to improve their cash flow and tax burden. Companies who take advantage of these tax breaks will make it easier on themselves regarding their estimated tax payments. For companies who used these benefits early in the year, it allows them to see a quicker return on their investment. By taking advantage of these new laws, companies can help themselves and others by expanding and creating new jobs, lending a helping hand to a struggling economy.