Page 22 - MetalForming-January-2019-issue

Tax Reform
some businesses might be unable to absorb all of the depreciation benefits available to them. As a result, even full taxpayers now could find that a tax lease allows them to monetize other- wise unused depreciation benefits by trading them in for a lower after-tax cost to acquire equipment.
Note that the temporary increase in expensing allowance now also applies to pre-owned-equipment pur-
chases. Additionally, the 100-percent expensing benefit will begin to phase out in 2023.
Interest Expense Deduction—The TCJA now places limits on deductions related to interest accruals and pay- ments made on debt in a given tax year. Unfortunately, this could nega- tively affect heavy borrowers and those investing in business growth and expansion activities. Equipment leas-
ing could help to offset the pain, how- ever, because rental payments arising from a lease are not included in this calculation.
Investment Tax Credit (ITC)—Par- ticularly in the area of clean-energy investments, ITC has offered many businesses an affordable means to achieve greener, energy-efficient power generation. After much debate, the tax- reform legislation did not modify ITCs currently available for solar, wind and other forms of alternative energy. For instance, solar-energy systems placed in service before 2020 generally are eli- gible for a 30-percent ITC, and available tax credits still will phase out slowly after 2020.
Section 179—Traditionally, Section 179 allowed businesses with limited capital acquisitions to expense 100 per- cent of the cost of new and pre-owned equipment in the first year of owner- ship. Owners could expense as much as $500,000 in cost, as long as a busi- ness’ total equipment investment for the year did not exceed $2 million. For investments totaling more than $2 mil- lion, the deduction declined on a dol- lar-for-dollar basis.
The TCJA permanently increased the deduction to $1 million beginning in 2018, on an equipment-investment limit of $2.5 million. Section 179 always has applied to new- and pre-owned- equipment purchases, which previ- ously was a significant distinction from bonus depreciation. However, the tax- reform changes to Section 179 are both permanent and now applicable to a broader set of assets, including HVAC and ventilation systems, and fire-pro- tection and security systems.
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20 MetalForming/January 2019
www.metalformingmagazine.com