Take Advantage of Big Tax Breaks - Knox Manufacturing Solutions

Bonus Depreciation, and Section 179 Deduction

With the productivity and profitability of U.S. manufacturers in mind, Mazak encourages you to take advantage of two key tax incentives from the government regarding machine tool purchases.* A first-year bonus depreciation allows for a 80 percent bonus deduction, while the now permanent Section 179 provides equipment expensing up to 1,160,000.

BONUS DEPRECIATION

Bonus depreciation is an additional first year depreciation allowance.
In 2023, bonus depreciation drops to 80 percent on qualified capital expenditures.
Bonus depreciation is generally taken after the section 179 spending cap is reached.
Available for both new and used equipment.

SECTION 179 DEDUCTION

The Section 179 Expensing limit is now permanent at $1,160,000.
A dollar-for-dollar phase out of the deduction begins once qualified purchases exceed $2,890,000.
This deduction is good on new and used equipment, as well as off the shelf software. To take the deduction for tax year 2023, the equipment must be financed or purchased and put into service between January 1, 2023 and the end of the day on December 31, 2023.

EXAMPLE CALCULATION OF SECTION 179 AT WORK DURING THE 2023 TAX YEAR

$150,000 machine purchase/qualified expenditures

Cost of Equipment	$150,000
Section 179 Deduction	$150,000
Bonus Depreciation Deduction (80% in 2023)	–
Normal First Year Depreciation	–
Total First Year Deduction	$150,000
Cash savings ($150,000 x 21% tax rate)	$31,500
Lower Cost of Equipment (after Tax Savings)	$118,500

$1,500,000 machine purchase/qualified expenditures

Cost of Equipment	$1,500,000
Section 179 Deduction ($1,160,000 max 2023)	$1,160,000
Bonus Depreciation Deduction (phased reduction 80% in 2023)	$272,000
Normal First Year Depreciation (20% of each of 5 years remaining amount)	$13,600
Total First Year Deduction ($1,160,000 + 80% bonus depreciation + normal first year)	$1,445,000
Cash savings ($1445,600 x 21% tax rate)	$303,576
Lower Cost of Equipment (after Tax Savings)	$1,196,424

^*Please consult with your tax professional regarding these incentives.