_________________________________________________________________________________________________ Tax
Incentives
Layering Section 179 and bonus depreciation
There are nuances between these two provisions, but generally both apply to tangible personal property such as machinery, equipment, office furniture, and certain nonresidential real estate improvements. Section 179 allows 100 percent expensing up to $ 2.5m in 2025. However, if a company places more than $ 4m in assets into service, the Section 179 deduction begins phasing out. Bonus depreciation at 100 percent applies to assets acquired after Jan. 19, 2025; before that period in 2025 it would be 40 percent.
One advantage of Section 179 is that many states permit a Section 179 deduction, whereas most do not permit bonus depreciation deductions.
By thoughtfully layering these incentives and aligning them with the appropriate timelines, manufacturers can significantly optimize their federal and state tax savings.
Taking advantage of real estate incentives
Although the above-mentioned strategies warrant careful consideration, decisions can be made in relatively short order after consulting with the company’ s financial team and tax experts. They don’ t generally take changes to operations of the business to maximize the benefit. Where things get more nuanced is around the newest accelerated depreciation available for manufacturing real estate through the Qualified Production Property provisions.
Real estate is an area that requires heavy investment and business planning. Business planning decisions- such as financing, permitting, site selection, lease options, and construction- are all interconnected and can significantly influence the optimal course of action. With numerous moving parts and tight deadlines, conducting a thorough costbenefit analysis demands both time and specialized expertise. That said, in the right circumstances, the savings can be substantial. For example, a $ 10m investment in a brandnew facility, financed at a 12 percent cost of capital could generate net present value savings of $ 2.2 million at a 29.6 percent tax rate, which could help finance a sizable portion of a new facility’ s construction costs.
The window of opportunity for these benefits is tight. New construction must begin after Jan. 19, 2025, finish by Jan. 1, 2029 and be placed in service by Jan. 1, 2031.
The property must be new, located in the United States and used by
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