It’s important to make the most out of all the space you have in your manufacturing facility or warehouse. Spaces that are cramped, unorganized, or cluttered can reduce ergonomics, morale, and productivity. The installation of modular offices offers cost-effective solutions that transform unused space in order to maximize existing space. To keep employees comfortable and cool, HVAC or soundproofing can be equipped into a modular office. Modular offices also allow for a new conference area, break room, or office to be installed in your facility.
Installing Modular Offices is Cost Effective
Modular offices are much less expensive than relocation or new construction, and you could even receive a tax depreciation incentive. When your company purchases certain equipment, it can be written off through tax depreciation a little bit at a time. For instance, if your business spends $30,000 on a piece of equipment, it can write off around $3,000 each year for 5 years. This is better than not being able to write the business expense off at all, even though most business owners would rather write it off entirely.
If businesses could write the entire amount of their expenses off, they could purchase more equipment right away instead of buying a few pieces of equipment every few years. For this reason, Section 179 was established to stimulate the U.S. economy, in addition to incentivizing your company to propel it in the right direction. For most small businesses, the whole cost of certain equipment can be written off on this year’s tax return.
2020 Section 179 Deduction Limit
The deduction limit for 2020 is $1,040,000. The deduction can be used on either used or new equipment – even software from off the shelf. The equipment must either be purchased or financed and be in service by the end of the year (December 31, 2020).
Equipment Purchase Limit
The equipment purchase limit is $2,590,000, which is the maximum allowable amount that can be spent on equipment prior to Section 179. This deduction includes used or new equipment. The available deductions for your company will be reduced dollar for dollar. Section 179’s spending cap is a tax incentive for most businesses (a win-win situation).
Equipment and Goods That Qualify for Section 179 Deduction
In order for a company to qualify for a Section 179 deduction, the following equipment must have been purchased and currently be in use between January 1st and December 31st of the tax year you plan to claim it:
- Enhancements to current non-residential structures, including roofing, HVAC, security systems and alarms, and fire suppression
- Equipment purchased for partial company use and personal use – in this case, the deduction would be based on the amount of time the equipment was used for business purposes
- Any property that’s attached to your building that isn’t a structural component of it (large manufacturing equipment and tools or a printing press)
- Office furniture
- Office equipment
- “Off-the-Shelf” computer software
- Computers
- Vehicles used for business purposes that have a gross weight exceeding 6,000 lbs.
- Personal property that’s tangible for business purposes
- Equipment including machines that were purchased strictly for business use
The equipment mentioned above will qualify regardless of whether it is used or new or was financed, purchased, or leased; however, it should be new to you.
Section 179 Qualifying Businesses
To qualify for the Section 179 deduction, businesses must lease, finance, or purchase less than $2,590,000 worth of used or new business equipment during the current tax year.
The information stated above is an abridged version of the Section 179 deduction for the tax year 2020. For more information about qualifying equipment and limits, including qualified financing for Section 179, contact a CPA or visit https://www.section179.org/. This website will answer all of your questions about the Section 179 deduction, and help you decide if this tax incentive is right for your business.
