Section 179 Decoded

Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.

The purpose behind Section 179 - to motivate the American economy (and your business) to move in a positive direction. For most businesses (adding total equipment, software, and vehicles totaling less than $139,000 in 2012), the entire cost can be written-off on the 2012 tax return.

The total amount written off ($139,000 in 2012), and limits to the total amount of the equipment purchased ($560,000 in 2012). The deduction begins to phase out dollar-for-dollar after $560,000 is spent.

All businesses that purchase, finance, and/or lease less than $560,000 in new or used business equipment during tax year 2012 should qualify for the Section 179 Deduction. If a business is unprofitable in 2012, and has no taxable income to use the deduction, that business can elect to use 50% Bonus Depreciation and carry-forward to a year when the business is profitable.

The most important difference is both new and used equipment qualify for the Section 179 Deduction. Bonus Depreciation covers new equipment only. 

The equipment, vehicle(s), and/or software must be used for business purposes more than 50% of the time to qualify for the Section 179 Deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.

2012 Deduction Limit = $139,000 For new and used equipment, as well as off-the-shelf software.

2012 Limit on equipment purchases = $560,000 This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced.

Bonus Depreciation = 50% This is taken after the $560k limit in capital equipment purchases is reached.   Bonus Depreciation is available for new equipment only. Bonus Depreciation can also be taken by businesses that will have net operating losses in 2012.

Contact us for a bid on your capital purchase before year end.   Don’t miss out on Section 179 deductions and Bonus Depreciation 801 816 0800

Bonus Depreciation For 2012

Using Section 179 and/or Bonus Depreciation with an Equipment Lease or Equipment Finance Agreement might be the most profitable decision you make in 2012.

Why? Because the amount you deduct will exceed your cash outlay for 2012 when you combine (i) a properly structured Equipment Lease or Equipment Finance Agreement with (ii) a full Section 179 deduction. It is a bottom-line enhancing tool (plus, you get the new equipment and software you're adding to your business).

Also, the '$179 bonus per $10,000 financed' is available thru 12/31/2012. This means that you (a) get your equipment, vehicles, and/or software now, (b) get to take full advantage of the Section 179 deduction in 2012, and (c) get Section 179 bonus cash as well.

Leasing and Section 179

Did you know that your company can lease equipment and still take full advantage of the Section 179 deduction? In fact, leasing equipment and/or software with the Section 179 deduction in mind is a preferred financial strategy for many businesses, as it can significantly help with not only cash flow, but with profits as well.


The obvious advantage to leasing or financing equipment and/or software and then taking the Section 179 Deduction is the fact that you can deduct the full amount of the equipment and/or software, without paying the full amount this year. The amount you save in taxes can actually exceed the payments, making this a very bottom-line friendly deduction (you are reading this correctly; in many cases, the deduction will actually be profit).

Why offer financing?

As a Vendor, Distributor of Manufacturer here are five key reasons to consider offering financing to your customers.

1.  It’s a Growing Trend

A study by the Equipment Leasing & Finance Foundation shows that among manufacturers who offer financing for their equipment, approximately 30 percent of all equipment sales are financed by the manufacturer or its finance partner.  That rate is increasing each year as the financing division plays a more important role in the organization’s overall strategy. According to the same study, of all manufacturers who offer a financing option to their customers, 67 percent expect equipment financing will increase as a percentage of their manufacturer sales.  The growth of this trend is largely due to the benefits derived from offering financing and its business impact.


2. It Builds Customer Relationships
Building customer relationships and improving customer retention are key benefits of establishing a finance capability.  It allows you to build rapport and trust in addressing customers’ financial issues, as well as answering their questions about the equipment.  It also extends the relationship into future transactions since it provides opportunities to offer advice and assistance with end-of-lease/financing term decisions such as whether to purchase new or existing equipment.  In addition to developing follow-up selling opportunities, it helps build long-term relationships for repeat business.

3.  It Provides Incremental Income

Providing a financing option can provide benefits including facilitating equipment sales and generating additional revenue. In addition to an increase in interest income, additional revenue may be generated if the equipment can be sold for more than its remaining book value at the end of lease.

4. It Creates Value
Offering financing creates value for your customers by saving them money, getting them better terms and helping them stay current.  One way they save money is through the manufacturer's knowledge of the equipment and ability to resell pre-owned equipment.  This may enable the manufacturer to take additional risks on the residual value which lowers the customer's monthly payment.

Customers may get better terms when they purchase equipment that might be otherwise delayed because of lack of financing elsewhere, and the manufacturer is willing to provide better financing terms.  Additionally, value is created when a customer takes advantage of leasing/financing since it eliminates the risk of them owning equipment that is technologically obsolete.

5.  Industry Expertise is Available to Assist You
An important consideration about offering financing is that there is plenty of assistance that can help you determine and establish the captive financing option that’s appropriate for your business.   The non-profit Equipment Leasing and Finance Association has an online Manufacturer & Vendor Resource Center which contains strategic, legal, financial and operational topics manufacturers should consider when developing or enhancing their finance capability.  The website also contains searchable databases to find financing partners and service providers to assist you.

Increasing knowledge of captive financing among small and medium-sized manufacturers and vendors will prepare the way to greater growth opportunities for their businesses and the economy.

Mazuma Capital Adds EVP/General Counsel

DRAPER, UT, March 13, 2012 -- Mazuma Capital is pleased to announce the hiring of Todd K. Jenson as EVP/General Counsel.  “The hiring of in-house General Counsel is a consequence of growth, new ventures and upcoming strategic partnerships,” said Jared Belnap, CEO and President of Mazuma Capital. "We are excited about adding Todd to our executive team and look forward to leveraging his experience, and leadership in expanding our footprint in the middle-market leasing segment.”

 “I am excited to join Mazuma Capital.  They are a talented group, and consequently, Mazuma is growing quickly in their core segment.” said Todd Karl. Jenson, newly appointed EVP/General Counsel of Mazuma Capital.

About Todd Karl Jenson

Todd received his Master of Business Administration from the University of Utah, David Eccles School of Business in 2002.  Todd attended Willamette University College of Law in December 2004, and completed his final  year of law school at Brigham Young University (BYU), J. Reuben Clark Law School. The majority of his legal career has been spent between his former employer Republic Bank Inc. as in-house Corporate Legal Counsel, in private practice at two small and mid-size law firms, and at the Office of the Utah Attorney General.  Todd’s expertise at Republic Bank, Inc. focused on commercial litigation, collections, secured lending, bankruptcy, creditors’ rights, and the Uniform Commercial Code.  During his tenure at the Office of the Utah Attorney General Todd represented the Utah Labor Commission in State and Federal Courts handling legal matters in the areas of OSHA, wage claims, discrimination and fair housing.  In private practice, Todd worked in the areas of commercial litigation, insurance defense, personal injury, property law, probate, and municipal law.

About Mazuma: Mazuma Capital is committed to our client’s success. Our unique capabilities and innovative product offerings provide solutions accelerating financial growth. Servicing both rising companies and established businesses, Mazuma continues to secure its position as the middle-market industry leader. We build long-term relationships by delivering on our commitments. Mazuma co-authored the Utah Best Practices Alliance. Mazuma Capital subscribes to the ELFA Code of Fair Business Practices and NAELB code of ethics.

Media Contact:

Julie Fuchs

801-816-0800 Ext. X291

jfuchs@mazumacapital.com

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Mazuma Capital Funds $12.5m Transaction For Thermal Coal Producer

DRAPER, UTAH, February 17, 2012 – Mazuma Capital, a leading national direct lender, today announced that it has funded over $12.5 million dollars for a U.S. high quality thermal coal producer.

The coal producer sought several funding sources that had expertise in funding newer companies. They had many challenges present in the transaction from the type of equipment, to the documentation aspect.  There were also several factors that affected the credit due to recent mergers.  Due to these challenges the financing was denied through several well-known banks and vendors. Mazuma Capital was ultimately the right financing source to help structure and fund the transaction.

A favorable structure was an important objective in order to provide cash flow, the appropriate tax, and accounting factors to meet the financial goals of the company. The structure also needed to provide the ability to expense the payments over time.  Mazuma Capital was able to secure an approval in a timely fashion while meeting the needs of the company; from the terms to the unique structure.

“This is a newer company that is still in the midst of a huge growth phase.  Therefore, this transaction produced several challenges in finding a suitable financing structure to meet the goals of the company.  The lack of history, recent buyouts, and mergers made this a more difficult credit.  Our team worked hard to develop a perfect balance with the right structure, and suitable terms for the company,” said Jared Belnap, President and CEO of Mazuma Capital.

About Mazuma: Mazuma Capital is committed to our client’s success. Our unique capabilities and innovative product offerings provide solutions accelerating financial growth. Servicing both rising companies and established businesses, Mazuma continues to secure its position as the middle-market industry leader. We build long-term relationships by delivering on our commitments. Mazuma co-authored the Utah Best Practices Alliance. Mazuma Capital subscribes to the ELFA Code of Fair Business Practices and NAELB code of ethics.

Media Contact:

Julie Fuchs

801-816-0800 Ext. X291

jfuchs@mazumacapital.com

Tax breaks on business equipment to be scaled back

Two generous tax breaks small-business owners received during the recession are going to shrink dramatically in 2012. That makes year-end tax planning more important than usual.

The changes affect the deductions for purchases of equipment. One is called the Section 179 deduction, named for a provision of the Internal Revenue Code. The other is called bonus depreciation. Congress approved the breaks to make it easier for small businesses to expand and hire workers. Although the economy is still slow, the breaks are being scaled back.

Ed Smith, a tax partner at the accounting and consulting firm BDO in Boston, says he's talking with clients about whether it makes sense to buy equipment before the changes take effect.

"Understand that we're not going to have this deduction in the next couple of years," he said.

The Section 179 deduction allows a small business to deduct upfront rather than depreciate the cost of equipment, such as computers, vehicles, machines in manufacturing, office furniture and sheds.

The deduction for 2011 is $500,000. In 2012, it will drop to $125,000. And in 2013, it's expected to fall to $25,000 — the amount it was back in 2002.

Bonus depreciation allows small businesses to take a deduction for equipment expenses beyond the amount allowed under Section 179. For 2011, the bonus depreciation is 100 percent. The maximum that can be deducted under the two deductions combined is $2 million. In 2012, bonus depreciation drops to 50 percent.

Under normal depreciation rules, the cost of equipment is deducted over a number of years according to a formula set by the IRS. So the Section 179 and bonus depreciation provisions have given small businesses accelerated tax savings.

You can learn more about the deductions in IRS Publication 946, "How to Depreciate Property." It goes into detail about the deductions and the regulations that govern how they can be taken. For example, the Section 179 deduction can't be used for your new heating and air conditioning unit. But that equipment can be depreciated.

It's also a good idea to discuss your plans with an accountant or tax attorney.

Changes in the tax law shouldn't be the biggest reason for buying equipment. Deductions aren't worth it if you're wasting your money on something your business doesn't need. But if you've been debating whether to buy tablet computers for your employees or install manufacturing equipment in 2011 or in 2012, it might make sense to move the purchase into this year. If you can get a better price than you would next year, that's another reason to buy now.

A big caveat: The equipment has to be up and running by Dec. 31. You can't order a new server or drill press this year, have it delivered in January and still take the deduction. You have to be able to use it — which means it needs to be installed — by the end of the year. However, it's OK if you don't pay for the equipment until next year, or if you're going to take several years to pay it off.

Something else to think about is whether you want to take advantage of these deductions now. You're not required to use Section 179 and bonus depreciation. In fact, you need to elect to take a Section 179 deduction when you file IRS Form 4562, "Depreciation and Amortization."

Depending on what your profits look like this year, and what they're likely to be in the coming years, you might prefer to use regular depreciation. So you might want to postpone your purchase until next year.

Smith says the money owners will save on their taxes from Section 179 and bonus depreciation can help them pay for the equipment they've bought. But using these deductions will eliminate any tax savings you would have had from depreciating equipment over time. Smith points out that when equipment is depreciated under regular rules, the tax savings from that can be used to cover principal payments if the equipment was financed. And the interest on financing is deductible.

Again, it's a good idea to consult a tax professional to decide which approach makes the most sense for your business.

Source Modesto Bee www.modbee.com