Small businesses commonly face expense issues when it comes to expanding that larger businesses do not have to worry about. Whether it is acquiring new equipment or making new additions to the property, the expense of these projects can hold small businesses back, making it more difficult for them to grow.
Fortunately, there have been some changes to the Internal Revenue Code Section 179 that allow businesses to deduct up to one million dollars of their expenses for equipment necessary for their business operations. The purpose of these changes is to help relieve the tax burden for small businesses while also providing a benefit for big businesses.
The new tax amendment took effect on January 1, 2018 and can be applied to any equipment purchased and put into use before the year ends on December 31, 2018.
The following are the main changes made to Section 179:
- Deduction Limit: The new deduction limit for 2018 is $1,000,000, up from the $500,000 in 2017. This deduction can be applied to new and used equipment, vehicles, furniture, software, property additions, and for the first time, new roofing. Equipment is only eligible for this deduction if it is financed or purchased and put to use within the 2018 calendar year.
- Spending Cap: The new spending cap for 2018 is $2,500,000. This means that businesses can spend up to this amount on new equipment and still qualify for the full $1 million deduction. The deduction will decrease for every dollar spent beyond the spending cap and will disappear completely if a business spends over $3,500,000.
- Bonus Depreciation: The new bonus depreciation for 2018 is 100% and it now covers new and used equipment. Businesses that spend beyond the new spending cap may be eligible for bonus depreciation.
Section 179 Deductions and New Roofing
If you own or operate a commercial building, then you know how important it is to keep the roofing of the building in good shape. The roof helps protect your employees or tenants, assets, and the building itself from severe weather, moisture, and other outside elements. Therefore, it is important to replace the roof of a commercial building when necessary to keep your building protected.
For the first time, the Section 179 internal revenue code allows building owners to expense the cost of a new roof in 1 year instead of spreading it out over 39 years. This will greatly help smaller businesses reduce the cost of a new roof and expand quicker since they can write off the cost of roof the same year.
If you are interested in expensing a new roof for your business with a Section 179 deduction, you must understand the following about Section 179:
- How does Section 179 work: Section 179 allows businesses to deduct the purchase price of eligible equipment, up to $1,000,000, from their total income. Businesses can write off equipment expenses for the year that they purchase the equipment, instead of writing off set amounts at a time over a number of years. This means that you can write off the expense of a new roof the year you make the purchase, instead of writing off little by little for the next 39 years. If the total cost is less than $1,000,000, a business can write off the entire purchase. The new changes to Section 179 were put in place to help stimulate the growth of small businesses.
- Section 179 Limits: A business cannot write off more than $1,000,000 in 2018 and cannot use the deduction if the total purchase is beyond $2,500,000. Every dollar spent over the $2.5 million spending cap will reduce the write off amount dollar-for-dollar until $3.5 million is spent.
- Qualification for Section 179: Any business that purchases, finances, or leases eligible equipment in 2018 and spends less than $2,500,000 qualifies for the Section 179 deduction. There are several different types of equipment that are eligible for the deduction, including new roofing. Refer to the Section 179 website to view the qualifying equipment.
- Bonus Depreciation: Bonus depreciation is being offered at 100% in 2018 and can be applied to equipment expenses that go beyond the $2.5 million spending cap. Unlike in previous years, bonus depreciation can be applied to new and used equipment as long as the used equipment is new to your company. Typically, the Section 179 deduction is applied first, and then bonus depreciation is applied. While most of the changes to Section 179 in 2018 favor small businesses, the 100% bonus depreciation helps larger businesses who spend more than the Section 179 cap.
- Over 50 Percent Business Use: For equipment to be eligible for the Section 179 deduction, it must be used for business purposes over 50 percent of the time. Businesses that use the deduction to write off a new roof will likely not have to worry about this requirement.
Replace your Roof with Reliable Roofing
Replacing the roof of your commercial building is an important expense for your business and thanks to the new amendments to Section 179, the cost of a new roof does not have to cripple the expansion of your business. If you are ready to replace your roof, contact the professionals of Reliable Roofing.
We provide quality roof installation services for any type of commercial roofing and we can also help you understand how to write off the cost of your new roof under the new changes to Section 179. Give Reliable Roofing a call at (815) 893-0149 for more information about our roof replacement and installation services.
Please note: This information is not intended to be legal advice or tax advice. For any legal or tax questions please consult a qualified attorney or tax professional.