Tax Incentives for Equipment Purchases

The "American Taxpayer Relief Act of 2012," signed 1/2/2013, extends increased Section 179 expensing for small business equipment and software purchases made in 2013, as well as a 50% bonus depreciation allowance for new machine tools and other equipment ordered and placed into service during 2013.

The Section 179 deduction limit is $500,000 for new and used equipment purchases made and placed into service in 2013. In addition, the cap on how much equipment can be purchased before the deduction begins to phase out is $2,000,000.

Section 179 Boost for Small Businesses

Small businesses whose total equipment purchases do not exceed $2,000,000 in 2013 can expense the first $500,000.
Equipment Purchases $650,000
Section 179 Deduction $500,000
50% Bonus Depreciation Deduction on remaining amount $75,000
Regular First Year Depreciation Deduction on remaining amount
$15,000
Total First Year Deduction $590,000
Tax Savings (assuming 36% tax rate) $212,400
Cost of Equipment After Tax Savings $437,600