Originally passed in 2017, the Tax Cuts and Jobs Act was passed by Congress to benefit small businesses. Section 179 specifically, allows organizations to deduct a percentage of the cost of new or used equipment in the first year of its use.
Section 179 is allowing businesses to deduct the full purchase price of qualifying equipment, including vending machines, purchased or financed during the 2022 tax year. This amount will reduce starting in 2023.
The goal of this section of the act is to help businesses reduce taxable income in the year they purchase equipment, offsetting some of the cost. This incentive helps businesses invest in themselves and purchase the needed equipment their operation needs to flourish. Recent updates have made Section 179 more beneficial to both small and large businesses as a form of tax relief.
The bonus depreciation amounts are set to reduce year over year through 2027. This means 2022 is the only year you can claim 100% of new or used machine purchases in the first year. As 2022 nears a close, we recommend looking into this option for vending solution purchases you can make now to optimize your tax write offs.
The bonus depreciation for first-year deductions will reduce as follows:
- 100% for machines put in service by December 31, 2022
- 80% for machines put in service by December 31, 2023
- 60% for machines put in service by December 31, 2024
- 40% for machines put in service by December 31, 2025
- 20% for machines put in service by December 21, 2026
Tax rules are complicated, and 1sourcevend recommends you check with your accountant to see how these new rules, summarized below, may impact your business. This summary is provided for informational purposes only, and is not intended as tax, legal or accounting advice.
How Does Section 179 Work?
In the past, businesses would often write off a portion of an equipment purchase over a few years through depreciation. While that’s better than no tax write-off at all, that left businesses with few options if cash flow was tight. Updates to Section 179 of the tax code allow businesses to write off the entire purchase price of equipment (currently up to $1,080,000 for each piece of equipment) in the same year it is purchased — reducing the tax burden and freeing up revenue for future purchases.
Here’s an example of how it works:
What’s Different About Section 179 for 2022?
Much of Section 179 tax code has remained the same, except for a few updates. In previous years, businesses were able to write off $1 million per equipment purchase. With the new updates, businesses can purchase new or used equipment and write off up to $1,080,000. The total spending cap to take a deduction for all equipment purchases is now $2.7 million.
Companies that would like to purchase equipment, like vending machines, now instead of waiting for the following year will enjoy reduced tax liability.
Can I still use bonus depreciation?
Yes. For 2022, bonus depreciation is being offered at 100%.
Generally, a business can apply Section 179 first and then apply the added provision of Bonus Depreciation.
Curious if vending can help your business? Download A Distributor’s Guide to Best Practices in Vending & Inventory Control.
Can I Use Tax Deductions for Vending Machines?
Most goods used by American businesses, including off-the-shelf equipment and software qualify under the Section 179 Deduction. Companies purchasing equipment such as vending machines and inventory control software in 2022 will enjoy reduced tax liability thanks to updates in the tax code.
This article is for informational purposes only. Please check with your accountant for information on how recent tax changes may impact your business.
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