Accelerated Depreciation: A Smart Move for Year-End Purchases
As the year comes to a close and the holiday sales roll in, many business owners are considering making big purchases. Whether it's new equipment, a company vehicle, or office furniture, the year-end holiday deals make it an attractive time to invest in your business. But did you know you can make those purchases even more financially beneficial with accelerated depreciation?
What Is Accelerated Depreciation?
Accelerated depreciation is a tax strategy that allows business owners to take larger deductions in the earlier years of an asset's life. By writing off a big portion of the cost up front, you can reduce your taxable income significantly in the current year, improving your cash flow. This is particularly helpful for small business owners who need to manage expenses while reinvesting in their businesses.
Why Accelerated Depreciation Makes Sense Right Now
With the holiday financing deals available on big-ticket items, purchasing assets before the end of the year can have a double impact. Not only do you save upfront with discounts and special financing, but you can also use accelerated depreciation methods—like Bonus Depreciation or Section 179—to make a big dent in your tax liability for this year.
Bonus Depreciation allows you to deduct a large portion of the asset's cost in the first year, up to 100%, depending on the asset type and current tax laws.
Section 179 also lets you deduct the full purchase cost of certain qualifying assets, making it ideal for small businesses that need to make investments and get the maximum tax benefit.
Example: A Win-Win Scenario
Let’s say you’ve been eyeing a piece of equipment that costs $20,000. With a holiday financing deal, you may be able to acquire it with 0% interest or a sizable discount. By purchasing now and using Bonus Depreciation or Section 179, you can write off the entire $20,000 this tax year, which directly reduces your taxable income. That’s a significant saving that could help your business keep more cash on hand.
Things to Keep in Mind
To qualify for these deductions, the asset must be purchased and put into service before December 31st. So, if you’re thinking about taking advantage of these holiday deals, act quickly.
Not all assets qualify for Bonus Depreciation or Section 179 deductions, so make sure you consult with a tax professional to determine if your planned purchase is eligible.
Final Thoughts
Holiday financing deals present a great opportunity for business owners to make important purchases while saving on taxes. With accelerated depreciation, you can effectively leverage these end-of-year deals to lower your taxable income and get the most out of your investments.
If you’re considering making a purchase before the year ends and want to understand how accelerated depreciation can benefit you, please reach out to our office. We're here to help you make the best financial decisions for your business.
