The Small Business Jobs and Credit Act of 2010 signed into law on September 27, 2010, increases tax incentives which encourage capital purchases, such as packaging machinery. The incentives raise deduction amounts for capital purchases made in 2010 and allow a bonus depreciation for equipment placed in service this year.
The new law increases the limit on expenses that businesses can deduct for capital expenses to $500,000 with a cap of $2 million. Capital expenditures exceeding $2 million are subject to a dollar-for-dollar phase out of the deduction. You may have heard this referred to as Section 179 of the tax plan. Section 179 deduction limits were originally increased in 2008, extended in 2009 and again earlier this year. The $500,000 deduction under the new law is double the previous deduction limit of $250,000. The $2 million cap on eligible equipment purchases is also a substantial increase from the previous $800,000 limit.
Businesses are also allowed to immediately write-off 50 percent for depreciation on new equipment placed in service during 2010. Normally, this depreciation would be taken over many years. In effect, this allows companies to improve cash flow. All companies can take advantage of the bonus depreciation.
Eligible businesses can take advantage of both of these tax breaks, taking a deduction for the first $500,000 in equipment bought this year, and then the 50 percent bonus depreciation on the rest. Deductions are allowable even if the purchases are wholly or partially financed. These incentives particularly benefit small and mid-sized companies who have an opportunity to make investments that otherwise would be delayed or impossible to make this year.
How the economic stimulus benefits your company:
Most small and medium-size businesses can take advantage of these incentives which help them pay for new equipment by lowering their tax burden and improving cash flow. Companies that take advantage of the tax incentive may also get some benefits with their estimated tax payments.
With the increased deductible to $500,000 many packaging equipment solutions are fully deductible. Companies planning to take advantage of the new tax incentive should consult their tax planner to fully understand the benefits. However, for most companies considering a new equipment purchase, this is a strike now, before the end of 2010, opportunity to receive the value of new packaging equipment, plus the added value and quicker ROI offered with the tax incentives. Contact us and we can work together on creating a plan to suit your business needs.
ProMach is a family of best-in-class packaging and processing solution brands serving manufacturers of all sizes and geographies in the food, beverage, pharmaceutical, personal care, and household and industrial goods industries. ProMach brands operate across the entire production line: filling, bottling and capping, decorative labeling, flexibles and trays, pharma, handling and sterilizing, labeling and coding, and robotics and end of line. ProMach also provides systems and integration including turnkey solutions, design/build, engineering services, and productivity software to optimize production line design and deliver maximum uptime.
ProMach designs, manufactures, integrates, and supports the most sophisticated and advanced packaging and processing solutions in the global marketplace. Its diverse customer base, from Fortune 500 companies to smaller, privately-held businesses worldwide, depends on reliable, flexible, technologically advanced equipment and integrated solutions. ProMach is headquartered near Cincinnati, Ohio, with manufacturing facilities and offices throughout North America, Europe, South America, and Asia. For more information about ProMach, visit www.ProMachBuilt.com and for more information on ProMach Careers, visit www.ProMachCareers.com.