PPP LOAN UPDATE
Purchase Equipment with Unused PPP Funds
Do you have any money left over from your Paycheck Protection Program Loan? Are you struggling to decide where to allocate these funds? You can use your loan money to purchase eligible equipment and still enjoy a tax reduction thanks to Section 179! Improve your business, make the most of your loan: It’s a win-win!
As you are likely aware, the PPP loan decreases the amount you can deduct on your tax returns for this year, including rent and payroll. Under Section 179, allocating your loan toward business improvements such as software and equipment can decrease your tax liability.
There are a variety of small and medium businesses this deduction applies to. If your business has purchased, financed, and/or leased new or used business equipment during tax year 2021, you should qualify for the Section 179 Deduction. There is a cap for how much you can spend on equipment to qualify, but we will get back to that in a minute.
Section 179 applies to equipment, tools, hardware and out-of-the-box software for your business. These items can be new, or new-to-you, as long as they were purchased and put into use within 2021.
$1,050,000 can be written off for new and used equipment. It also applies to off-the-shelf software. The limit to the total amount of equipment purchased is $2,620,000.
After $2,620,000, the deduction begins to phase out on a dollar-for-dollar basis. If your company spent more than $3,670,000 on equipment this tax year, we’re sorry to say this deduction does not apply to you.
Business Use Rule
Two more caveats about the equipment:
- the applicable equipment must be used for business purposes more than 50% of the time to qualify for the deduction.
- Despite supply chain pressures, equipment purchased in 2021 must still be put into use before Dec. 31, 2021, to qualify. Please keep lead times in mind before you buy.
To qualify for your 2021 tax return, your equipment must be financed or purchased and put into service between January 1st, 2021 and December 31st, 2021.
Big businesses, this one’s for you! Bonus Depreciation can be taken after the Section 179 spending cap is reached. Some years it is offered, some years it isn’t. This year, not only is it offered at 100%, but you can also use the bonus depreciation on new and/or new-to-you (used) equipment.
BE PREPARED FOR 2022
The past two years have been tough for many. Maybe you didn’t spend as much this year as in previous years as a result. But your spending today could put you ahead for next year if you make use of Section 179! The scanners, printers, etc. you’ve been considering come with quite the incentive. Up to 1,050,000 incentives if you ask us. Don’t wait until 2022.
When it comes to your supply chain needs, we have the equipment, software and service to help you automate more, access more, achieve more. Reach out today and we will help you make the most of your deduction.
*We’re barcode and RFID experts, not tax specialists. This article is meant to introduce you to Section 179. For tax guidance or questions, please consult a tax professional. For your supply chain products, services and supplies, you’ve come to the right place!