If you’re an equipment vendor, learning more about how Section 179 of the IRS tax code works could help you sell more – and help your customers get the equipment they need while saving some money on their taxes. Scroll to disclosure: 1
In a nutshell, Section 179 lets businesses deduct the full purchase price – up to $1,080,000 – of qualifying equipment financed during a given tax year.
For vendors, raising your customers’ awareness about that provision – including that they can take the full deduction now and save money on their bottom line rather than depreciating equipment over several years – could be a selling point. Customers only need to purchase your equipment and have it in service by the end of the calendar year.
Here’s how that could turn into real cash for customers and give them the incentive to buy from you now rather than waiting: Let’s say you’re selling a piece of equipment for $50,000. Your customer could choose a total first-year depreciation amount of $50,000 for a potential tax savings of $10,500.
We talked to some of our in-house equipment finance experts about Section 179 on ways you can position this potential tax savings to help close more deals.
“Section 179 is a way equipment vendors can help their customers save money by getting equipment in before the end of the year. Under Section 179, buyers can accelerate the entire depreciation for the purchase into the current tax year,” explains Arthur Kliman, senior strategic account manager. “The only caveat: The equipment needs to be installed and operational before the end of the year – not just ordered but in operation.”
Explaining the potential benefit can provide a sense of urgency to encourage customers to purchase equipment from you while its available so they don’t miss out on that tax savings.
“It’s a benefit for clients that are profitable and have a need for equipment,” Kliman says, adding, “Essentially, they’re paying dollar-for-dollar what they would have paid in taxes and putting it toward the equipment.”
Ted Osgood, vice president of sales, points out that matching deferred-payment financing with the benefit of Section 179 can be another tool to help make a sale.
“Explain to your customers that using deferred-payment financing options plus Section 179 could help them get a tax benefit this year without making payments until next year,” he explains. “The benefit is real and tangible when you take the conversation away from price and focus on value. The customer can get equipment that may be revenue-generating in the future while saving on taxes now, and you could pull a purchase that wouldn’t happen until next year forward to meet your end-of-year targets.”