Your 2024 Tax Strategy: Leverage Bonus Depreciation and Section 179
For business owners, 2024 presents valuable opportunities to maximize tax savings through Bonus Depreciation and Section 179 deductions. Both tools are designed to support businesses in reinvesting and growing by offering significant tax relief. Here’s what you need to know to make the most of these strategies.
Bonus Depreciation: Don’t Miss Out
Bonus depreciation allows businesses to deduct a percentage of the cost of eligible assets in the year they’re placed into service. For 2024, the deduction rate is 60%, a decline from 80% in 2023, and it will drop further to 40% in 2025. Acting now can help you take advantage of the higher deduction rate.
Key Points about Bonus Depreciation:
Eligible Assets: Includes machinery, equipment, certain vehicles, furniture, and improvements to nonresidential property like HVAC systems and roofing.
New or Used Assets: Applies to both new and used assets, provided they are new to your business.
Time-Sensitive Opportunity: Purchasing in 2024 maximizes your deduction. For example, buying $100,000 of qualifying equipment allows for a $60,000 deduction in 2024, compared to only $40,000 in 2025.
Section 179: A Flexible Option for Small Businesses
Section 179 provides immediate tax relief by allowing businesses to deduct the full cost of eligible purchases up to $1,220,000 in 2024, with the deduction beginning to phase out at $3,050,000. This tool is especially helpful for small businesses making substantial investments within these limits.
Highlights of Section 179:
Generous Deduction Limits: Allows businesses to deduct 100% of eligible purchases within the set limits.
Eligible Assets: Covers machinery, equipment, furniture, and certain property improvements.
Immediate Savings: Provides upfront relief, helping businesses reinvest quickly.
Choosing Between Bonus Depreciation and Section 179
The best approach often involves combining Bonus Depreciation and Section 179 to suit your business’s unique needs:
For Larger Purchases: Use Bonus Depreciation for expenses exceeding Section 179’s limits.
For Smaller Purchases: Section 179 offers an efficient way to deduct costs fully and immediately.
Working with a tax professional can help you strategically use these tools to maximize your savings while staying compliant with tax regulations.
Planning Ahead for 2024
With the Bonus Depreciation rate set to decrease further in 2025, 2024 is a critical year for proactive tax planning. Delaying key investments could result in reduced deductions, impacting your ability to reinvest in your business.
Bonus Depreciation and Section 179 are designed to help businesses grow by easing the financial burden of purchasing equipment and assets. Understanding how to leverage these tools effectively ensures your business is positioned for success in the coming years.
For additional details on these tax incentives, visit the IRS website:
If you have questions or need assistance navigating your 2024 tax strategy, let’s talk! The Purple Group can be a trusted partner in helping you make the most of these opportunities.