Can the Full Purchase Price of a Digital Billboard Be Deducted in 2013?
What if you could deduct the full purchase price of a new digital billboard this year? It is possible, provided you act now — before the temporary depreciation bonus and Section 179 benefits expire on December 31.
The American Taxpayer Relief Act extends higher deduction limits for 2013 — up to $500,000. After $500,000, you can still claim a 50% Bonus Depreciation. These deductions are reduced dollar for dollar if you purchase more than a total of $2,000,000 on equipment in 2013, because the benefit is designed to help small and medium-sized businesses and encourage them to add equipment this year.
So how does it work? Let's say you spend $200,000 on qualifying equipment, such as digital billboards, in 2013. Under Section 179 you'll be able to "write off" the entire purchase amount. Your tax savings, assuming a 36% tax rate, would be $72,000. This brings the equipment cost after taxes to $128,000.
Of course the more you spend (up to $2 million) the more you can deduct, so let's run the scenario again with a larger equipment purchase. If you invest in $650,000 in qualifying equipment before the end of 2013, you'll be able to use Section 179 to write off the first $500,000. Then you can take a 50% Bonus Depreciation for the remaining $150,000. Now you are writing off all but $75,000 of your purchase. Can it get any better? It can. You are still allowed to depreciate that $75,000 over five years, so in this year you can take a "Year 1" depreciation of 20% on that amount, bringing your total write off to $590,000 for 2013. If you have a 36% tax rate, your total cost of the equipment after taxes is about $437,000 - a tax savings of over $200,000!
Keep in mind that we provide this information as a courtesy and you should always consult your tax professional before making any purchase decisions. Because Watchfire digital billboards aren't shipped in from overseas, there is still time to place your order and have your new billboards installed before the December 31, 2013 deadline. Make sure that your company doesn't miss out on the financial benefits of adding an income-generating investment and claiming a significant tax deduction.