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How much can be deducted? Te amount of the deduction will


basically be the cost of the qualifying property, up to the $1 million limit. According to the IRS, if you opt to deduct only part of the cost, you can gen- erally depreciate the cost not deducted.


What dates affect the ability to apply for the deduction?


Te total cost amount of deduc-


tion in a given year is $2.5 million. Te deductions apply only to purchases made and put into service in that year. So, in order to apply for the deduction on your 2018 taxes, the purchase or purchases being deducted must have been acquired after Jan. 1 and placed in service before Dec. 31, 2018.


Who uses Section 179? Section 179 is an incentive mainly


geared toward small businesses. According to a small survey from financing company Balboa Capital, seven out of 10 small business owners planned to use Section 179 to deduct the cost of eligible business equipment


purchased in 2017. Te survey also revealed six out of 10 small business owners were planning to invest in new or upgraded equipment in 2018.


How does bonus depreciation fit into this?


Bonus depreciation gives tax-


payers the ability to immediately deduct a percentage of the cost of a qualifying purchase. According to Section179.org, bonus depreciation typically is taken after the Section 179 deduction is taken. The new legislation is applicable retroactively starting with equipment or property purchased by Sept. 27, 2017, and placed into service by Jan. 1, 2023. “Te policy reason behind the


depreciation increase is to encourage people to invest and modernize their manufacturing plants and technology and provide an immediate tax reduc- tion that used to have to be recovered over a period of time,” said David Sites, International Tax Partner, Washington National Tax Office, during an AFS webinar in January. “You will still pay


the taxes later—it’s a timing difference. But it is a great cash flow tool.” One of the changes that will likely benefit metalcasters is what qualifies for bonus depreciation. With the new law, used equipment can now qualify for bonus depreciation, but it must the be the taxpayer’s first time using it.


How much money could be saved in 2018 with the deduction?


Several free Section 179 deduction


calculators are available online, includ- ing one at Section179.org. Te calcula- tors take into account the cost of equip- ment, tax bracket, amount you plan to deduct with Section 179, amount you plan to deduct with the bonus deprecia- tion, normal first year depreciation, and total first year deduction.


Does electing the deduction make sense for my business strategy?


Before making decisions on whether to elect for the Section 179 deduction, business owners are advised to confer with their accountants or a tax specialist.


May 2018 MODERN CASTING | 37


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