Your Guide To Year-End Tax Benefits on 2024 Equipment Purchases

If you’re looking to put money back to your bottom line this year, your business could save thousands of dollars on new and used equipment purchases. Take advantage of available government tax incentives aimed to encourage businesses to buy equipment and invest in themselves. There are similar tax advantage opportunities in Canada as well.

Let’s start with the U.S. Section 179 of the IRS Tax Code, which offers eligible businesses a great opportunity to maximize purchasing power. Most of the new and used (must be new to you) equipment your business will purchase or finance will qualify for the Section 179 deduction. It allows you to deduct a large percentage of qualifying equipment in the year it was put into service. This creates a larger initial expense deduction than using a standard depreciation method, thus reducing your tax burden. Keep in mind, Section 179 cannot result in a net loss.

Section 179 Highlights for 2024 Include:

• Maximum amount that can be deducted is $1,220,000 (a $60,000 increase from 2023).
• Maximum amount of equipment purchased (and take the full deduction) is $3.05 million.

Section 168(k) allows for bonus depreciation (60% expensing for 2024 purchases) on eligible equipment and property, thus allowing accelerated depreciation for a reduced tax burden, similar to the Section 179 deduction. A company can take both Section 179 and bonus depreciation allowances, but Section 179 must be applied first. Therefore, any qualified property purchased over the $1,220,000 limit may then be taken in bonus depreciation. So it’s great for businesses that spend more than the Section 179 spending limit. Bonus depreciation is scheduled to continually phase out until 2027 (see table below).

PLACED IN SERVICE DATE	BONUS DEPRECIATION
January 1 to December 31, 2024	60%
January 1 to December 31, 2025	40%
January 1 to December 31, 2026	20%
January 1, 2027 and thereafter	0%

Section 168(k) Bonus Depreciation Highlights for 2024 Include:

• Bonus depreciation has been reduced from 100% over the past several years and is now at 60% of the cost of both new and used equipment (must be new to you). The deduction will decrease each year until it hits 0% in 2027.
  • Bonus depreciation is ideal for larger businesses who spend more than the $3.05 million purchase cap noted above.
• It’s also important to note that equipment must be used for business purposes more than 50% of the time to qualify for these deductions.
• Businesses with a net loss are still qualified to deduct the cost of new equipment and carry-forward the loss.

Let’s look at the tax savings introduced by bonus depreciation, along with Section 179.

NEW/USED EQUIPMENT	TAX YEAR 2024
Equipment Purchases	$1,500,000
Section 179 Deduction	$1,220,000
Depreciable Amount	$280,000
Bonus Depreciation (60% of Depreciable Amount)	$168,000
Regular Depreciation (5-Year Property)	$22,400
Total First-Year Deduction	$1,410,400
Tax Rate	21%
Total First-Year Tax Savings (Section 179 and Bonus Depreciation)	$291,480
Tax Savings Using Section 179 Only	$1,220,000 x .21 = $256,200

Before you take Section 179 and/or bonus depreciation deductions, consult with your tax or legal advisor.   

In Canada, the Capital Cost Allowance (CCA) allows eligible individuals and non-incorporated partnerships to immediately expense 100% of the cost of certain new machines under specific conditions in 2024. Under the Accelerated Investment Incentive rules, these businesses can benefit from an enhanced tax depreciation write-off of up to three times the normal rate for the first year.

For example, if a business purchases equipment for $100,000 classified under Class 38 (which includes most power-operated movable equipment used for excavating, moving or compacting), they would typically be eligible for a 30% write-off, or $30,000, in the first year. However, with the Accelerated Investment Incentive, the business could claim up to $90,000 as a first-year tax depreciation. Additionally, there may be further incentives available for zero-emission equipment — your Volvo dealer is a great first step to helping you find valuable incentives for electric heavy equipment.

Now’s a great time to take advantage of higher first-year depreciation.

If you’re looking to finance or lease a new machine, check out our complete product lineup here in North America featuring a broad range of financial offers. With bonus depreciation phasing out over the next few years, it may be advantageous to buy now instead of waiting. To take advantage of Section 179 and bonus depreciation in the U.S. this year, your equipment must be purchased and put into service between January 1, 2024, and midnight on December 31, 2024.

If you have additional questions about the advantages of Section 179 and bonus deprecation, check out these FAQs or talk to your local tax advisor.

Disclaimer: U.S. and Canadian tax incentives are complicated. There are many limits, exclusions and special rules for different types of businesses in each country. The information in this article, and on this site, is not and should not be construed as tax or legal advice. Each business situation is different and tax regulations change frequently. We strongly recommend that you consult with your tax advisor regarding how these tax-saving opportunities apply in your situation.

Categories: Construction Equipment, Corporate Information, Finance