Did you know that the Bonus Depreciation and Section 179 of the U.S. tax code offer significant tax-saving opportunities for businesses, including those in the concrete industry?
Here’s how you can utilize these provisions for your concrete business.
What is Bonus Depreciation?
Bonus depreciation allows businesses to immediately deduct a large percentage of the cost of eligible assets in the year they are placed into service, rather than spreading the deduction over several years. This means that under the Tax Cuts and Jobs Act (TCJA) of 2017, businesses could deduct 100% of qualifying assets purchased between September 27, 2017, and December 31, 2022. However, this percentage started to phase down in 2023 (e.g., 80% in 2023, 60% in 2024)
What does this mean for your concrete business?
This means that you can use bonus depreciation to deduct costs associated with heavy machinery, trucks, mixers, and other equipment purchased for use in operations. This is especially beneficial for large investments in new or used equipment, as bonus depreciation applies to both.
Bonus! There is no annual spending cap for bonus depreciation, making it ideal for businesses with substantial equipment purchases.
What is the Section 179 Deduction?
Section 179 allows businesses to deduct the full cost of qualifying equipment and software purchased or financed during the tax year, up to a certain limit. For the 2023 tax year, the deduction limit is $1,160,000, with a spending cap of $2,890,000.
What does this mean for your 2023 business tax deductions?
Section 179 is particularly useful for smaller-scale equipment purchases such as power tools, small concrete mixers, or office technology for business operations. The deduction is limited to the business’s taxable income, making it advantageous for businesses with lower net profits compared to bonus depreciation
Key Differences from Bonus Depreciation:
- Section 179 has a deduction limit and a spending cap, whereas bonus depreciation does not.
- Section 179 can be applied to both new and used property, just like bonus depreciation, but has more restrictions on certain types of assets.
What can you do to strategize for your concrete business?
Maximize deductions:
Use Section 179 for smaller purchases up to the deduction limit, and apply bonus depreciation for large-scale investments or amounts exceeding the Section 179 cap. Plan purchases strategically to align with tax year-end deadlines to maximize available deductions.
Consult with a tax advisor:
Work with a tax professional to ensure compliance with IRS guidelines and to optimize the use of these deductions in conjunction with other tax-saving strategies.
Here are some resources to help you further explore your tax-saving options:
• IRS guidelines on Section 179 and Bonus Depreciation
• Industry-specific resources from the National Ready Mixed Concrete Association (NRMCA) or equipment vendors offering advice on tax benefits
