While tax laws are ever evolving and changing, there are real benefits that you can use to the advantage of your business. One of the biggest new tools you can use is bonus depreciation. This incentive allows businesses to deduct the full cost of certain assets, such as tractor trailers and equipment, in the year they’re purchased. This enables business owners to reduce their taxes and strengthen cash flow. For industries that rely heavily on equipment, like the moving and transportation industries, this tax incentive can help inform your decision about when to update or upgrade your assets. This article explores the benefits of bonus depreciation, but consider this blog to be friendly advice from a fellow small business. Always consult your trusted experts before making major decisions for your company!
Immediate Savings = Immediate Cash Flow
The largest advantage to using this benefit is the immediate tax savings for your business. Instead of spreading deductions over several years, companies can deduct up to 100% of certain equipment purchases in the first year. But how does that help your business? By using bonus depreciation, your business can:
- Reduce taxable income, meaning lower taxes owed for the year
- Increase cash flow, leaving more finances available for growth
- Improve ROI, as these major purchases, like a new tractor trailer, can provide full benefit to your company faster
From full fleets to a single owner operator, this can transform the financial picture of a major purchase. Through Trans Advantage, businesses can finance or lease tractors and trailers in a way that not only benefits your operations, but can potentially benefit your overall financial picture.
Customize Your Savings
Another benefit of bonus depreciation is that it’s not a one-size fits all program, and businesses can opt in or out depending on their exact needs. For example, some companies can use bonus depreciation to create a net operating loss that carries forward into future years, offsetting income down the road. This allows business owners to align both their tax and business growth strategies. At Trans Advantage, we frequently assist our customers with purchasing equipment around their tax planning, ensuring they get the right equipment while also supporting the business’s overall financial well-being.
Bonus Depreciation is designed to incentivize reinvesting into small businesses. By lowering the after tax on major assets, companies are more likely to purchase new equipment, make necessary upgrades, and allow ample business growth. Within the transportation and moving industries, investing in new tractors and trailers doesn’t just provide a renewed sense of reliability, it also qualifies businesses for major tax deductions.
What Does and Doesn’t Qualify?
Not all business assets qualify for bonus depreciation, but many pieces of equipment in the moving and transportation industries do. For example:
- Tractors have a 3 year MACRS recovery period
- Trailers have a 5 year MACRS recovery period
For a moving company owner, opting to deduct the entire cost in the first year allows immediate savings and strengthens cash flow that can be used to support other areas of the business.
Always Consult Before Buying
It’s important to note that bonus depreciation is an evolving tax benefit. Business owners should always:
- Stay up to date on IRS rules
- Consult with tax professionals before making major purchases or financial decisions
- Consider timing purchases to capture the best tax benefits
When paired with the right partner, businesses can maximize these considerations to increase both efficiency and financial savings. Trans Advantage is a trusted partner, helping businesses align their goals with major equipment purchases.
Bonus depreciation offers businesses more than just a tax break, it creates opportunities for cost savings, growth and reinvesting into your own business. If you or your company are planning to invest in new tractors or trailers, understanding how bonus depreciation can benefit you will help you maximize the benefits of your major purchases. With proper equipment and a true partner in Trans Advantage, you aren’t just gaining new assets, you’re strengthening your bottom line. Contact our sales team today and start your journey with Trans Advantage!
