By Andrew Weaver
If you are opening a new quilting business, you should speak to your tax planner about a section of the IRS tax code that could really help with your cash flow in that critical first year!
Section 179 is an incentive for businesses to purchase, finance or lease qualifying equipment in 2015. It allows businesses to deduct the full amount of the purchase price of equipment (up to certain limits) in the first year, rather than having to depreciate the equipment over many years.
In some cases if you financed the machine, Section 179 could mean that during your first year of machine ownership the savings in your tax bill (or the increase in your refund check) is more than the total of monthly payments you had to send in!
Here is a sample of how this could apply to a purchase in 2015:
By applying Section 179 in this example, you have $9,800 taken right off your tax bill or straight into your IRS refund check.
Here is the best part – you get the deduction right away!
For example, let’s say you make a Gammill purchase in October and finance it through AFP, Arvest or another lender. You then receive your IRS refund or Tax Credit of $9,800 in February or March, depending on how quickly you filed your taxes. So you’ve gotten all this money back from the IRS but it will take you more than a year of payments on a 5 year loan to have written checks totaling $9,800. This cash infusion could provide a big boost in the first year of your business.
How much can I deduct?
For 2015 the deduction limit is the lesser of $25,000 or however much business income you had in 2015. If you are unable to use the entire deduction because your 2015 business income is less than $25,000, you can use the credit to offset all of your 2015 business income, and then carry forward the unused amount of the credit to the following year.
In past years, Congress has raised the dollar limit as the end of the year approaches (for 2014 they raised it to $50,000) but we won’t know until very late in the year.
Consult your tax advisor for further information.
What is my deadline to get in on this?
You should talk to your Gammill dealer right away! Your machine order should be placed by October 31 if possible to avoid potentially missing the deadline. In order to qualify for the Section 179 Deduction of $25,000, the equipment must be purchased, financed or leased and put into service by December 31, 2015.
Where can I get more information?
More information about Section 179 is available at www.section179.org. Please also remember to consult a tax professional for more information.
Is this a real thing? It sounds too good to be true!
YES! In our business, we have purchased computers, office furniture, etc. using this deduction. In 2014 at the end of the year we purchased a new Gammill delivery truck, and Congress raised the deductible amount to $50,000 at the last minute which allowed us to deduct the entire cost of the truck. This tax credit has been a really big help in my business, and I think you’ll find that it helps you too!