Benefits of Year-End Equipment Buying

benefits of year-end equipment buying

Estimated reading time: 4 minutes

Colder weather, dew-covered yards, flying birds overhead, holiday decorations, blankets of colorful leaves, acorns, and pinecones on the ground. These things let us know that we are in the year’s final months. For small business owners, the 4th quarter is possibly the busiest and most important sales quarter. They must plan for the holidays, run promotions, stay fully staffed, and maintain enough inventory to meet customer demand. This is also a good time for business owners to consider year-end equipment buying.

Investing in new or used business equipment before the year ends is a great way to start the new year strong. This Balboa Capital blog article examines some of the benefits of year-end equipment buying, and we think you will find it very informative.

Great bargains.

Cost is always a concern with equipment buying. Computers, software, furniture, fixtures, and vehicles often have high price points. However, as the year winds down, you might be able to save quite a bit of money. That is because equipment manufacturers often do their best to push out old or discontinued stock, and they achieve this goal by dropping prices during the holidays.

In many cases, old or discontinued equipment has all the bells and whistles your business needs, making it a viable option from both a productivity and a cost-saving standpoint. For example, let us say you own a manufacturing business that needs a new laser cutter. After looking at the various available makes and models, you find a previous-generation laser cutter that costs 25% less than its next-generation counterpart. It has the features needed to perform laser cutting and engraving with the highest level of accuracy. Opting for the previous-generation laser cutter will help you save money that can be used for other business-related expenses.

Tax savings.

A generous tax deduction thanks to Section 179 is another benefit of year-end equipment buying. Many business owners elect the Section 179 deduction. The Section 179 tax code allows businesses to deduct the total or partial price of eligible new and used equipment, also referred to as “property,” purchased and put into use on or before midnight on December 31st. The United States government created Section 179 to provide tax incentives to business owners who invest in capital equipment.

In 2024, the Section 179 deduction limit on eligible equipment will be $1,220,000, the spending cap on equipment purchases will be $3,050,000, and bonus depreciation will be 60%.1 As of this blog article, the bonus depreciation percentage is scheduled to be reduced by 20% beginning in 2025.2 Deduction limits and other numbers relating to Section 179 are subject to change; Congress has modified them many times over the past decade.

In 2023, the Section 179 deduction limit on eligible equipment is $1,160,000, the spending cap on equipment purchases is $2,890,000, and bonus depreciation is 80%. As of this blog article, the bonus depreciation percentage is scheduled to reduce by 20% each year beginning in 2023. Deduction limits and other numbers relating to Section 179 are subject to change; Congress has modified them many times over the past decade.

Boosts revenue.

Investing in capital equipment before the end of the year can help you start the next year strong. Your new equipment will be up and running during the fourth quarter, which will help your business run efficiently and without any delays through January, except for any winter holidays. As you know, January is typically when small business owners take the time to look back on their previous year’s sales results and plan for the year ahead.

Tasks like reviewing your business’s finances, evaluating revenue opportunities, setting sales goals, and revising your marketing efforts take time. Before you know it, you might spend the first few days or even weeks of the New Year finalizing your plans. While you do this, you cannot afford to let anything prevent your business from operating smoothly. Investing in the right equipment before the start of the New Year can help ensure that nothing goes wrong.

Year-end equipment buying summary.

If you are considering year-end equipment buying and need funding, make sure you work with a business lender that makes the entire process quick and hassle-free. That way, you can lock in a low price on equipment and get it before the New Year starts and meet the Section 179 tax deduction deadline, providing the equipment qualifies for Section 179.

Section 179 limits and information on the Balboa Capital website are for illustrative purposes only; the Section 179 limits and information provided are subject to change by the IRS. Please visit the IRS website or consult a qualified tax professional for confirmation of the current Section 179 limits and information related to your situation.

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Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses Hood CPAs. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.