Colder weather, dew-covered yards, flying birds overhead, holiday decorations, and blankets of colorful leaves, acorns and pinecones on the ground. All of these things let us know that we are in the final months of the year. For small business owners, the 4th quarter is quite possibly the busiest and most important sales quarter of the entire year.
They need to adjust their hours for the holidays, run promotions, stay fully staffed, and maintain enough inventory to meet customer demand. This is also the time for business owners to plan ahead so they can start the upcoming year strong. One way to do this is to invest in new or used business equipment before the year ends. This Balboa Capital blog article examines some of the key benefits of year-end equipment buying, and we think you will find it to be very informative.
Cost is always a concern when it comes time to purchase business equipment such as computers, software, furniture, fixtures and vehicles. 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 that your business needs, which makes it a viable option from both a productivity and a cost-saving standpoint. For example, let us say that you own a manufacturing business that needs a new laser cutter. After looking at the various makes and models that are available, you find a previous generation laser cutter that costs 25% less than its next generation counterpart, and that has the features needed to perform laser cutting and engraving with 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.
A generous tax deduction thanks to Section 179 is another benefit of year-end equipment buying. Many business owners elect the Section 179 deduction, and you can, too. The Section 179 tax code allows businesses to deduct the full or partial price of eligible new and used equipment, also referred to as “property,” that is purchased and put into use on or before midnight on December 31st each year. The United States government created Section 179 to provide tax incentives to business owners who invest in capital equipment.
In 2020, the Section 179 deduction limit on eligible equipment is $1 million, the spending cap on equipment purchases is $2.5 million, and bonus depreciation is 100%. 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. We recommend that you speak to an accountant or a tax professional prior to making an equipment purchase.
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, with the exception of any winter holidays. As you know, January is typically the month in which small business owners take the time to look back on their previous year’s sales results and plan for the year ahead.
Tasks such as reviewing your company’s finances, evaluating revenue opportunities, setting sales goals, and revising your marketing efforts each 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 prior to the start of the New Year can help ensure that nothing goes wrong.
If you are looking to purchase new or used equipment during the final months of the year and need funding, make sure you work with an equipment financing company 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.