Q4 considerations

This could be the best financial decision you make all year.

EXPLORE

Did you know that your company can finance equipment and software plus take advantage of the 2017 Section 179 and Bonus Depreciation tax breaks?

$500,000

179 deduction limit is now $500,000

Good on new and used equipment, plus off-the-shelf software

$2,000,000

The 179 spending cap

$2,000,000 is the maximum amount that can be spent on equipment and/or software before the deduction begins to be reduced on a dollar for dollar basis.

50%

Bonus depreciation is 50% for 2017

Qualifying businesses can write off 50% of the cost to acquire eligible equipment.

Learn more below.

Section 179

Take advantage of the Section 179 tax breaks. They offer a great opportunity to acquire equipment and increase your cash reserves at the same time.

Plan for Q4

Great! Maintain the tax advantages

If your 2017 budget requires more than $2,000,000 in capital equipment investment, you’ll need to manage the tax ownership of those assets in order to maintain your Section 179 write-off. By using a tax lease from Key Equipment Finance (KEF) to finance assets over $2,000,000, KEF becomes the tax owner of the equipment, which allows you to maintain your Section 179 deduction on assets below that threshold.
← Back

Super, accelerate those write-offs!

Businesses can immediately deduct up to $500,000 of capital equipment expense on their 2017 tax return. Our loans and non-tax leases can keep you in the driver’s seat by letting you retain tax ownership of your equipment, which enables you to use the Section 179 write-off to your advantage.
← Back

Section 179 example:

Purchase price:

$650,000

Less first-year write-off

($500,000 = maximum Section 179)

- $500,000

Less 50% Bonus Depreciation

(Remaining basis x 50% for eligible 2016 purchases)

-$75,000

Less normal first-year MACRS

(Remaining basis x 20%, assuming 5-year MACRS property)

-$15,000

Total first-year deduction

($500,000 + $75,000 + $15,000)

$590,000

First-year tax savings

($590,000 x 35% assumed corporate tax rate)

$206,500

Assuming a 35% tax bracket

Plan now for bonus depreciation.

Select the tab that best describes your company:

Full tax payer

Full taxpayers in need of the sheltering effect of equipment depreciation will typically benefit from tax ownership of equipment. This can be accomplished with:

a loan

an installment payment agreement

select leases

All of these options allow the user to deduct depreciation and interest charges from taxable income. Using a loan or non-tax lease would allow your company to claim the 50% bonus depreciation directly.

Alternative Minimum Tax

Corporations near to or already paying Alternative Minimum Taxes should be aware of the implications of purchasing assets. These organizations may not be able to effectively use all of the tax benefits associated with accelerated equipment depreciation.

Consequently, they can experience an increase in the after-tax cost of acquiring an asset.

In contrast, a tax lease can minimize the creation of additional tax depreciation:

The lessor records the equipment ownership and resulting depreciation. And because equipment leasing companies are able to more efficiently utilize the tax benefits associated with depreciation, the lessee can enjoy the savings in the form of lower monthly payments made to the lessor.

Net operating losses / Tax credits

Have Net Operating Loss (NOL) carryforwards or other tax credits?

A tax lease is advantageous for corporations that may not be able to leverage bonus depreciation directly due to expiring Net Operating Loss (NOL) carryforwards or other similar tax credits.


Depreciation deductions on purchased equipment reduce taxable income, sometimes preventing a business from fully using its tax credits. Leasing allows you to maximize the use of the credits to lower your tax liability. In this manner, tax benefits are passed on to the customer in the form of lower payments.

An additional consideration

The Mid-quarter Convention

The mid-quarter convention states that if a company acquires more than 40% of its assets during the fourth quarter, it must recalculate its depreciation expense using the mid-quarter convention tables.

Most companies attempt to avoid the mid-quarter convention by closely managing the amount of assets they purchase (and place in service) during the fourth quarter.

The power of a tax lease

Leasing allows a company the freedom to obtain the equipment it needs, when it’s needed. With tax leases, companies avoid the fourth-quarter asset acquisition restrictions, because the leasing company is the tax owner of the equipment; yet the business still receives the tax benefits in the form of lower payments. Leasing can be a helpful option when project delays or unexpected equipment replacement needs arise in the fourth quarter. 

Benefits of financing

Enjoy enhanced flexibility with the following:

  • Flexible end-of-term options — Return the equipment, renew the lease, or purchase the equipment at the end of your lease.
  • 100% financing — No down payment means you have more money to invest in other revenue-generating activities.
  • Cash and credit line preservation — Liberate existing credit lines for short-term needs and avoid large cash outlays for assets you will use over a multi-year period.
  • Equipment flexibility — Leverage upgrades and add-on options through your lease, plus include optional installation, maintenance and other charges in your financing contract.

Financing allows your company the freedom to acquire the equipment it needs, when it’s needed.

Summary

Key Takeaways
Days
Hours
Minutes
Seconds

Reminder: Equipment and software must be in place by midnight, December 31, 2017.

Taking advantage of tax breaks and utilizing financing might be the best move you make this year.

The net result:

You're able to acquire the equipment you need to stay competitive and grow your business, now and in the future.

Work with financing and equipment experts to tailor a solution to fit your needs.