Are you on the fence about whether to get new equipment this year or next? Perhaps you’ve wanted to invest in new machinery for a while but haven’t got around the sorting it out. Or maybe you’re unsure whether it’s financially advantageous to do it now or wait a while. If you’ve got equipment on your mind, then getting it ordered before year-end can be a savvy move for many businesses. There are some key tax advantages that you can profit from, as well as a few other benefits too. In this article, we look at 5 of the most popular reasons why businesses get equipment before the end of the year.
#1 – Take Full Advantage of Depreciation
By purchasing your equipment during the current financial year you’ll benefit from an extra 10% depreciation allowance. You can currently depreciate a maximum of 40% of your equipment costs but this will drop to 30% next year. It’s likely that this will decrease even further in the coming years so it makes sense to take full advantage while you can.
#2 – Write Off Purchases or Leasing Costs
Business owners are allowed to write off the cost of purchasing or leasing equipment up to $1 million. This enables you to immediately deduct the costs from your gross income in the next financial year. The deductions will show up on your 2019 tax return straight away so you can benefit almost instantly. Check out this IRS guide to tax deductions for more detailed information.
#3 – Use Available Budget Before It’s Lost
Most businesses run a budget system that allocates a fixed amount for planned costs each year. If your business or department is underspent at year end, then it’s common practice for the funds to be plowed back into the bottom line. Basically, if you don’t use it then you’ll lose it. For some, this means that it’s essential to spend the budget while it’s available, especially on things like equipment that can generate more income in the following financial year. Some companies choose to bring forward planned equipment purchases so that they can use this year’s budget to pay for it, which frees up next year’s for other expenditure.
#4 – Maximize Revenue for The Following Year
Investing in new equipment often has a strong ROI that can be felt almost immediately. Purchasing or leasing new equipment before the end of the year will mean you can hit the ground running from the start of the next one. You’ll be able to benefit from increased capacity or efficiency from day one so that your revenue steadily increases throughout the year. This is especially important if Q1 is your busiest time of year since new equipment will allow you to take full advantage.
#5 – Lock-In Equipment Prices Before They Increase
Many businesses increase their prices at the start of the financial year. Whether it’s due to inflation, increased operating costs, or currency fluctuations affecting source materials, prices rarely go down. So, it’s often preferable to commit to equipment purchases or leasing agreements before the end of the financial year. This enables you to take advantage of current pricing before any increases so that you secure the best possible deal.
If you are considering new equipment for your business, then it’s worth looking into as soon as possible. Research the tax deductions and depreciation amounts that you could be eligible for so that you know what your options are. Consider your business goals for next year and decide whether equipment is going to contribute to them. This way you can be confident that you’re making the right decision for the long-term future of your company.
How We Can Help
Strategic Capital offers equipment financing, small business loans, and merchant cash advances that support organizations across the USA. We don’t require capital which means that your personal and business assets aren’t part of the equation. If you’re in need of short-term financing, then we can help. Whether it’s to pay for emergency repairs or investing in expansion we offer small business loans without the need for collateral. Best of all, you’ll benefit from competitive repayment terms and low interest rates, so you have more money to reinvest in your business.
Transparency, innovation, and expertise are the driving factors behind everything we do. With a talented team of advisors, a plethora of funding partners, and the best technology available -we go above and beyond to help our clients receive their capital rapidly with the industry’s most competitive repayment options and interest rates. We want to break speed records, not bank accounts.
Upon submitting your application, it’s reviewed by a dedicated Capital Advisor. We generate the best rates and terms at lightning speed through our funding matrix and robust lender network. Yep… it’s that simple. Learn more about our equipment financing options here.
– Bradley Keys