Guide: Go Digital and Save with PATH Tax Benefits
Certain business investments, such as signage, may qualify for depreciation and IRS Section 179. By lowering your taxable income, the Section 179 deduction and the Bonus Depreciation can dramatically cut your tax bill, freeing up cash in the short term.
The Protecting Americans from Tax Hikes (PATH) Act of 2015 was signed into law on December 18, 2015 giving deductions to businesses that purchase qualifying equipment during 2016.
With its passage, the PATH Act made the Section 179 annual deduction limit of $500,000 permanent. Prior to 2016, approval of this annual deduction was often passed with only days left before the end of the tax year. For businesses that had already purchased and installed new equipment this was helpful, but it didn’t allow companies to plan ahead for larger purchases like new signage or a digital billboard. With permanency, the Section 179 deduction can become a planning tool for small to medium size companies who need to invest in new signage in order to drive more business.
Section 179 also allows for a Bonus Depreciation that, though not permanent, offers an additional deduction through 2019. With the Bonus Depreciation, businesses can depreciate 50% of the cost of equipment acquired and put into service before the end of this year. The 50% depreciation bonus is also available for equipment purchases in 2017, but after that, the Bonus Depreciation will phase down to 40% in 2018 and 30% in 2019 before disappearing.
So how does it work? Let's say you spend $100,000 on qualifying equipment, such as a digital billboard, or a new sign structure and digital message center for your business before the end of 2016. Under Section 179 you'll be able to "write off" the entire purchase amount. Your tax savings, assuming a 35% tax rate, would be $35,000. This brings the equipment cost after taxes to $65,000.
To learn more about how to put the PATH Act to work for your business, download our free guide.