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Leverage potential tax benefits by purchasing gear by the end of the year

Most of our for-profit clients have their fiscal year match the calendar year. As such, this time of year, we often receive phone calls that start “My accountant says I have to spend $30,000 by the end of the year – what do I need?”

Section 179 allows taxpayers to deduct the cost of certain property as an expense when the property is placed in service.  Therefore, as long as we can deliver equipment fully configured and in a useable state, our client’s $30,000 investment in new technology may reduce their taxable income up to the full $30,000.

Our accountant explained this benefit using the “tractor principle”. Say a farmer buys a new tractor at the end of the year – even if there’s four feet of snow on the ground and the farmer has no intention of using the tractor until April, as long as it’s in the farmer’s barn and in full working condition as of December 31, it can be depreciated as an expense this year.

We’re not accountants, so talk to yours. Make sure you’re taking full advantage of your Section 179 expenses, and if you want to get fully configured equipment delivered by 12/31/19, made sure you approve your POs to us by Friday 12/13/19.