TAX CODE 179

 Made Simple

So you’ve heard of Tax Code 179 . . .  but how does a business really use it?

Businesses typically want to REDUCE  INCOME  TAXES

• To reduce taxes businesses either reduce revenues or increase expenses
• It is unlikely that businesses want to reduce revenues… So increasing expenses is the logical option
• BUT, how does a business increase expenses but not use any of their cash? 
• Depreciation is how….Tax Code 179 is just using depreciation more effectively
• Tax Code 179 allows a business to fully depreciate (i.e. expense) the cost of the equipment/software in the year they purchase it
• Depreciation is the expense a business takes for purchasing and using equipment/software
• Depreciation is one of those rare expenses that DOES NOT require a business to use money from their bank account

• Normal expenses like payroll, insurance and rent are paid with actual cash out of the business’ bank account

Tax Code 179 REDUCES the effective COST of the Equipment/Software (an example)

• Equipment/Software Quote =             $25,000
• Business’ Estimated Tax Rate=              35%          
• $25,000 * 35% = $8,750.00 in 2017 income tax savings
• Therefore, a $25,000 piece of equipment less the tax savings of $8,750.00 equals net project cost of $16,250.  You have just shown the business how to save $$.

Businesses can EARN MORE CASH in 2017

• Business purchases equipment/software in 2017

• Business finances the equipment/software through GSG
• GSG requires NO $$ down and defers the start of the business’ payments until late 2017
• Taking the Tax Code 179 Tax Deduction Now with No Money out of pocket for the purchase of the equipment/software in 2016 means….
• Owners can take the extra $35,000 in cash (tax savings from example above) out of the business in form of extra bonuses or pay.  They make more MONEY.