Write-Offs for Your Construction Company

Section 179 of the IRS Tax Code offers quite a windfall for small businesses. It allows you to write off prices for buying qualifying equipment or software that was put into service the same year purchased. For this year, the deduction limit for equipment purchases is $2,700,000.

Bonus depreciation at 100% will end on December 31, 2022. Beginning in January 2023, depreciations will be:

• 2023 – 80%
• 2024 – 60%
• 2025 – 40%
• 2026 – 20%

Versions of Section 179 have been in effect since September 1958. Its goal was the same then as it is now: To help small businesses by reducing their tax burdens and to stimulate small business investments.

Why You Should Use Section 179

No pressure, but there are several incentives to purchasing qualifying equipment before year-end 2022. If your company sells construction equipment, Equipment World says explaining Section 179 to prospective buyers can turn a “maybe” into a “yes.”

Before you plan any construction company purchase hoping it will qualify for the Section 179 benefits, to claim retroactive deductions, or for any Section 179 information, contact your tax professional.

…a company finances an excavator in September 2022. The total cost was $150,000. The payments of $2,700 begin in October. That would equate to three months of payments made in 2022 for a total of $8,100 (these are all rough figures for illustration purposes).The company…takes a Section 179 deduction on the machine for the full amount ($150,000). At a 35% tax rate, that equates to a net tax savings of $52,500. … The $52,500 in net tax savings minus the $8,100 paid out equals $44,400.By acquiring the equipment, the company’s 2022 is $44,400 better than it would have been had it not acquired the equipment at all. Plus, they get to use the equipment. –Equipment World

Construction Monitor and its marketing professionals can’t offer tax advice, but we have some ways to save money and make money this year and next. But like any available tax deduction, you have to use it, or you might lose it.

Learn more: Contact Construction Monitor.