Time To Invest In Restaurant Equipment

Congress Gives Small Businesses A Permanent Tax Break

At year’s end, the foodservice equipment industry and its customers received the gift that keeps on giving. After years of late-minute uncertainty on whether Congress would renew the deal that many business owners rely on to finance their big-ticket purchases, Washington got its act together in December and passed a mammoth tax bill providing small businesses a permanent tax break on buying equipment.

The much-anticipated Section 179 deduction locks in a large tax break for small-business capital investments that has been temporary until now. In addition, a bonus 50% deduction has been locked in through 2019, businesses of all sizes to depreciate half the cost of equipment acquired and put in service during 2015, 2016 and 2017.

The provision makes it more affordable for small companies to buy up to $500,000 a year worth of equipment, ranging from a computer printers to vehicles to reach-in refrigeration and ranges, and write them off immediately on a business’s taxes, instead of being depreciated over a number of years. While most equipment that small businesses lease, finance or purchase will qualify for the Section 179 Deduction, there are some exceptions, such as air conditioning or heating equipment or property used outside the United States. Information on qualifying capital items can be found here.

The deduction is essentially limited to small and midsize companies. It begins phasing out when a company spends more than $2 million a year on qualifying purchases, and is eliminated entirely for those that spend more than $2.5 million.

Section 179 was once a fairly limited tax break, with an annual cap of $25,000 or less. But starting in 2003, Congress began a series of temporary increases, each requiring annual reauthorization to prevent the cap from returning to $25,000. Congress developed a habit of waiting until the very last days of the year to make a decision, and missed the calendar deadline in 2012, passed legislation on Jan 1, 2013, retroactively raising the deduction limit for equipment business owners had purchased the previous year.

From now on, operators and small business owners can plan ahead. The 233-page tax deal, signed by President Obama, permanently sets the Section 179 cap at $500,000, subject to inflation adjustments.