April 7, 2022

Tax Deduction: How To Receive Tax Savings On Your Industrial Generator Purchase

orange-mobile-generator

As tax season approaches, business owners should be aware that there are specific tax deductions available that reduce the cost of your industrial generator investment. Section 179 is a tax deduction that can offset the cost of your new or used industrial generator and can equal huge tax savings for your small business during tax season.

What is a Section 179 Tax Deduction?

Based on the IRS Tax Cuts and Jobs Act (TJCA), Section 179 is a tax allowance that allows businesses to deduct the total cost of any capital asset (such as a new or used industrial generator) on their corporate tax return immediately, instead of having to depreciate the asset over its useful life. In prior years, tax depreciation for industrial generators occurred during a specified time length, and tax breaks were determined by an estimated usage of the asset by a business. 

This outdated process not only creates accounting issues for most companies but is often done incorrectly, leaving money on the table for those who need it most, like small business owners. The IRS hopes Section 179 will address this issue. Section 179 is a tax deduction plan by the government to help small businesses receive immediate tax relief from large equipment purchases and works as an incentive for business owners to invest in themselves by buying more machinery and materials that will increase future growth.  

Ideally, Section 179 eliminates any wait for the possible reimbursement of your industrial generator purchase and allows business owners to take advantage of receiving a full purchase price refund in the current tax year on your corporate taxes. For any tax year beginning after 2017, the TCJA raises the maximum Section 179 expense price from $500,000 to $1,000,000, with the phase-out limit increasing from $2 million to $2.5 million. For tax years beginning after 2018, these amounts have been indexed for inflation. To take advantage of these robust tax savings, your industrial generator must meet certain eligibility requirements. 

How Do I Qualify for Section 179 Tax Deduction?

To determine if the purchase of your industrial generator is eligible for a tax deduction under Section 179, consider the following eligibility requirements.

Business Qualifications

 Any small or medium-sized business or any large corporation that purchases any new or used business equipment during the tax year of 2021 should qualify for the Section 179 Deduction. However, the cost must be less than $3,670,000. Businesses can use the Section 179 Deduction to purchase any needed equipment now and benefit from the savings during the tax season in the following year. 

Equipment Qualifications

To qualify for a Section 179 Deduction, your equipment or asset must be: 

  • Tangible - According to the IRS website, any physical property or equipment such as industrial generators, furniture, or computer software qualifies for a Section 179 tax break. Intangible assets like copyrights or patents are not eligible, nor are buildings or land. Since industrial generators are used to supply power to your business in everyday use or in case of an emergency, this asset does qualify for the full tax deduction.
  • Purchased Before the End of the Year - The purchase of your new or used industrial generator must be completed before December 31st of the current year. Purchases made in the prior year before tax season are the only equipment purchases that qualify.
  • Equipment Must Be Placed in Service - Your industrial generator must be used in a business capacity to qualify for the Section 179 deduction. It is recommended that you use your purchase immediately so that it qualifies your business for the tax break. 
  • Equipment Must Not Be Purchased from a Related Party - The IRS will disqualify any new or used generator purchased from a related party, including a sibling, parent, or grandparent. Purchase your industrial generator from a reputable equipment company to ensure you qualify for your Section 179 tax deduction. 

Ready to purchase a new or used industrial generator and invest in the future growth of your business? Contact us today to speak with an equipment expert to determine which industrial generator will suit your business needs!