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Here's the low-down on "An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2020"Ě (commonly known as the "Tax Cuts and Jobs Act"Ě) and how it effects our used metalworking and capital equipment market.

The MDNA's Government Affairs Committee has followed, reported on and lent its voice in support of any legislation that has a direct impact on Machinery Sales and newly passed Tax Reform has a big impact.

2020 Deduction Limit = $1,000,000 (one million dollars)
This deduction is good on new and used equipment. To take the deduction for tax year 2020, the equipment must be financed/purchased and put into service between January 1, 2020 and the end of the day on December 31, 2020.

Likewise, many of these items have implications for entities that operate as partnerships. There is also a change to the way individual partners are taxed on flow through income.

2020 Spending Cap on auto repair equipment purchases = $2,500,000
This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true "small business tax incentive" (because larger businesses that spend more than $3.5 million on equipment won't get the deduction.)

Bonus Depreciation: 100% for 2020
Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached.
Bonus Depreciation is available for new and used equipment.

Can I Finance and Still Qualify for Section 179?
Business equipment financed still qualifies for Section 179. The tax law is still the same, even if youíre making payments on equipment for several years. The equipment needs to be in service and must be for business purposes to qualify for Section 179.

**This is not tax advice and everyone should consult their own tax experts to evaluate their individual situations.

 

 

(Published on 10/01/20)†Written by†David Salome, Brandywine Capital Associates, Inc.

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