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Understanding New Considerations for Year-End Business Purchases

For many businesses, preparations and year-end organization planning look very different this year. It may seem like a little early to be making the decisions, setting strategies, and buying new equipment for the new year, but there are a few additional factors at play that can disrupt your business. 

Year-end business purchase decisions need to be completed faster this year because of delivery shortages and other delays. Customers and business owners alike have not missed the impact supply shortages have on the economy and our regular purchasing habits. In 2021, it’s time to reimage the ways businesses typically prepare for the upcoming year.  

End-of-Year Tax Breaks

Many businesses elect to purchase major equipment at the end of the year to take advantage of sizeable tax credits. The section 179 tax deduction applies to machinery and equipment used in a trade or business. It can also be used to purchase a qualified property. The tax credit is generally available on a tax year basis and set on certain limits.

This year, these tax purchases might be affected due to supply chain disruptions. More than just receiving your equipment on time, if the transaction is not completed before year-end, your business might miss out on the tax credit, which may have been the purpose of the timing of the purchase. Experts are estimating that delivery on certain equipment can take up to eight weeks or longer, which means you should place your business equipment orders early!

Supply Chain Disruptions

This year has witnessed more than a few supply chain disruptions and shortages. Most well-known shortages for businesses include semiconductor chips, valves, plastics, and even cardboard. Aside from this, there has been a larger than average uptick in factory fires–the most ever recorded in a single year.

Many manufacturers are low on inventory and are having a tough time filling orders at a timely pace. This makes it difficult to meet the demand for equipment, an even better reason to get orders placed as early as possible.

Looking to Purchase Equipment Before the End of the Year?

Don’t wait to order the equipment your business needs! Whether you are looking to take advantage of end-of-year tax breaks on new equipment or are worried about manufacturers meeting demand in a timely fashion, the sooner you can secure funding and place your order, the better.

Remember that if your business received any pandemic-related assistance this year, (such as the Paycheck Protection Program and/or Economic Injury Disaster Loan) they do NOT affect your ability to use the Section 179 deduction.

Falcon National Bank specializes in funding for business equipment and business equipment leasing. We can help you secure the best plan for your business. If your business plans on purchasing new equipment before the end of the year to qualify for Section 179 or Bonus Depreciation, contact us.

*This information is not intended to offer any tax advice. Please consult with a qualified tax advisor concerning your specific situation.