Buying new ice-making and merchandising equipment this year could potentially give you big tax savings. Thanks to the Small Business Jobs Act (SBJA) of 2010, an increase in the Internal Revenue Tax Code’s Section 179 expensing limits (valid for equipment purchased between January 1, 2011 and December 31, 2011) makes this year an ideal time to buy. The revised Section 179 expense election contains two exciting tax incentives (see details below) on the purchase of new equipment such as the ISB Ice Bagging System equipment manufactured by Kold-Draft.
To help customers navigate the process and the potential savings, a helpful Q&A on the Section 179 election from the IRS tax code is available from Kold-Draft, manufacturer of the ISB Ice Bagging System — the revolutionary on-site ice bagging system. The ISB system has the capacity to fill and heat-seal up to 360 10-pound bags per day, every day. Finished ice drops into the bagger, where it’s automatically filled and sealed in 10-pound bags. That’s it. No more waiting for delivery trucks, no more torn bags, no more disrupting store traffic while the ice machine is loaded.
About the Code Section 179 Election
The Section 179 expense election is made available on a tax-year-by-tax-year basis. The original Section 179 of the IRS Code has been revised and now allows businesses to deduct, in the tax year in which the election is made, the FULL PURCHASE PRICE — up to $500,000 — of qualifying equipment that is put into service during that tax year, as long as total capital purchases do not exceed $2 million. That means a business can elect to deduct the full purchase price from their gross income in 2011 instead of deducting it a little at a time over the years through depreciation deductions. In addition, a one-time 100% bonus depreciation on any remaining amount over $500,000 can also be used on purchases of new equipment.
So what does this mean in dollars saved? Say that a profitable convenience store chain wants to purchase 50 ISB Ice Bagging Systems. The Section 179 election allows them to fully depreciate (deduct) the first $500,000 of the total purchase price in 2011. The after-tax savings in this example reduces the capital investment by 35%—an unprecedented savings on equipment and what should be a huge motivator for companies looking to move into the high-margin on-site ice category.
For a free copy of the Product Sourcing and Category Solutions Guide, including the Q&A on the Section 179 election, call Kold-Draft at 800-840-9577, ext. 9340.