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Changes to Section 179 Deductions and Bonus Depreciation


The Tax Cuts and Jobs Act passed in January includes incentives for small businesses and manufacturers to invest in equipment and other purchases. MODERN CASTING STAFF REPORT


P


assed on Jan. 2, the Tax Cuts and Jobs Act passed has many implications for


manufacturers and small businesses, including a significant change to the deduction limit of Section 179 of the IRS tax code. Section 179 gives taxpayers the


ability to deduct the cost of some types of property as an expense when they file their income taxes. In 2017, the deduction limit was $500,000, but with the passage of the Tax Cuts and Jobs Act, that limit has been doubled to $1 million. And the deduction limit on total equipment purchases in the year has been increased to $2.5 million. Additionally, the new tax law increased the bonus depreciation for the first year from 50% to 100%. Before the Stimulus Act in 2008,


Section 179 was limited in scope with lower thresholds for deduction and on its way to being phased out. However, that first Stimulus Act, and others after it, have given the section more steam, raising the limits to help incentivize small businesses to make


36 | MODERN CASTING May 2018


investments in their companies. With the substantial increases in


limits, metalcasters may consider the Section 179 deduction as they plan for investments in the next few years.


Which purchases qualify? Purchases qualifying for the


deduction include equipment, such as manufacturing machinery,


Section 179 gives


taxpayers the ability to deduct the cost of some types of property as an expense when they file their income taxes.


tangible personal property in the business, heavy business vehicles like forklifts or typical tractor trail- ers, computers and off-the-shelf software, and office furniture or equipment. It includes very large machinery items attached to the building itself, like many pieces of metalcasting equipment, provided it is not a structural component of the building. HVAC installation, roofing and fire suppression investments in your metalcasting facility may also qualify. According to the IRS, to qualify for the deduction, the property must meet the following requirements: • It must be eligible property. • It must be acquired for business use. • It must have been acquired by purchase.


• It must not be property described under “What Property Does Not Qualify.” Property that does not qualify


includes land and land improvements, leased property, property used for lodging, or energy property.


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