3 Major Tax Advantages to Purchasing Equipment

Have you ever made a decision that you later regretted? Maybe it had to do with a relationship or perhaps something more worldly like, “should I buy that boat”? A little time passes and suddenly, we find ourselves thinking, “I wish I had talked to someone before I made the decision”.

In our work lives, that type of decision often centers on labor usage. We look out our window and see a cluster of people all doing hand work and immediately think, surely there must be a way to automate that process. Suddenly, we get a tightness in our chest and remember the machine sitting in the back of the storage area. Paid a good bit of money for it and never could get it to work just right. The thought that immediately flashes through our mind is, sure wish we could talk to someone who could give us some wise counsel before we make the investment.

When we talk to FlexPAC customers, they often tell us that being this “resource” is one of the most valuable functions that FlexPAC offers. But why FlexPAC?  Aren’t there lots of other companies just like FlexPAC? Let’s go ahead and peel back the onion to see what we find.

• At FlexPAC, we take the time to learn your business, challenges, and pains. The more we learn, the better we can drill down with our solutions. Whether it be a “work loading” study for building maintenance or a complete automation walkthrough in packaging and product movement areas, FlexPAC analyses where labor is used and develops ideas on how to gain efficiencies.
• FlexPAC has a ‘brand neutral approach’. Because FlexPAC has such a wide broad offering, we can focus on exactly what product will improve your process; rather, than just finding areas where a certain product might work. Our innoPAC Design Center might start out with a corrugated solution in mind; but after research, the solution might become a polyethylene bundling application.
• FlexPAC believes that there are three components to maximized throughput. First, we supply the correct equipment: equipment that improves the process and also offers an ROI consistent with our customer’s benchmark. Next, we test and determine the best consumable for lowest cost effectively shipped. Finally, we supply factory-trained technical support to assure that the proper throughput is maintained. Using this methodology, FlexPAC is continuously looking for process improvements for our customers.

Our customers tell us that this approach works for them. Given the purposed changes in temporary labor, it is a great time to look at all areas where labor is being used. Automation will often allow our customers to reassign labor to more productive areas or to reduce the labor count altogether, When FlexPAC finds possible improvement, we can develop a concept and then through testing determine if the improvement yields enough savings to meet our customer’s ROI standards.

Also, there may be significant tax advantages for capital equipment invests. Below please find a quick review of Section 179 of the Federal Tax Code.

2016 Deduction Limit = $500,000

This deduction is good on new and used equipment, as well as off-the-shelf software. This limit is only good for 2016, and the equipment must be financed/purchased and put into service by the end of the day, 12/31/2016.

2016 Spending Cap on equipment purchases = $2,000,000

This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true “small business tax incentive”.

Bonus Depreciation: 50% for 2016

Bonus Depreciation is generally taken after the Section 179 Spending Cap is reached. Note: Bonus Depreciation is available for new equipment only.

The above is an overall, “simplified” view of the Section 179 Deduction for 2016. For more details on limits and qualifying equipment, as well as Section 179 Qualified Financing, please read this entire website carefully. We will also make sure to update this page if the limits change.

Our goal is to eliminate regrets. If you need sound, solution-neutral advice on possible continuous improvement projects, please give FlexPAC a call.