One of the challenges of a utility construction company is replacing old and buying new heavy equipment. The economy can make it difficult to get contracts or collect payments, tightening the company budget. When this happens, you have to pay the bills first, making new equipment upgrades or purchases difficult.
An example of this might be purchasing a heavy duty asphalt grinder for asphalt removal on a utility trench job site. An asphalt grinder can remove up to 1,200 linear feet of asphalt in one hour. Removing the same 1,200 linear feet from pipe trench with saw-cutting, hauling, disposal, and trench backfill takes all day.
Purchasing an asphalt grinding machine leads to much higher production and greater profit. However, many companies continue to use labor intensive sawcutting for asphalt removal on utility lines because they can’t afford new equipment.
What they might not be aware of is Section 179 of the IRS tax code. Section 179 is a tax provision. It allows businesses to deduct the full purchase price of qualifying equipment or software purchased or financed during the tax year.
You may currently depreciate equipment over several years. With Section 179 you can deduct the entire cost of the equipment the year you buy it. This provides significant tax savings for utility contractors.
Now you can invest in necessary utility trench equipment while reducing your taxable income. For example, a contractor could use Section 179 to deduct the cost of a new backhoe, excavator, or bulldozer. Or, a utility contractor could purchase an asphalt grinding machine or trench compacting equipment.
Here are some of the benefits of using Section 179:
Immediate Tax Deductions
A company deducts the full purchase price of qualifying equipment from their gross income in the year of purchase. For example, you could deduct the entire purchase price of an asphalt grinder from your taxes in the year of purchase. This saves thousands of dollars that you can reinvest in the business.
Enhanced Cash Flow
When a utility contractor purchases an asphalt grinder using traditional financing, there are monthly or quarterly loan payments. This can put a strain on cash flow, especially for small businesses. However, businesses using Section 179 avoid monthly payments by deducting the full purchase price of equipment from their taxes. This can free up cash flow for other expenses.
Increased Efficiency and Reliability
By upgrading their equipment through Section 179, utility companies improve construction project efficiency and equipment reliability. With new cost effective equipment, you will be more likely to complete your pipe installation project on time. A modern, efficient piece of equipment leads to a streamlined construction site, reduced downtime, and cost savings.
Innovation and New Technologies
When you use an asphalt grinder for asphalt removal, you can recycle the asphalt grindings as trench backfill. Reusing backfill material keeps waste out of the landfills and reduces vehicle emissions.
An asphalt grinder uses new efficient methods of asphalt removal. This ensures that utility companies remain competitive. Ultimately, Section 179 benefits utility companies by optimizing financial resources, improving services, and driving economic growth.
Discuss Section 179 with your Tax Accountant
Consult with your accountant to see if you qualify for Section 179 tax deductions. Tax laws and regulations can be complex and may vary based on your specific finances. Seek professional advice to determine if you are eligible for benefits under Section 179 of the IRS tax code.
Start Using the Benefits of Section 179 Today
Many Asphalt Zipper customers will use Section 179 tax code to purchase an Asphalt Zipper this year. It allows them to deduct the full purchase price of qualifying equipment with immediate cost savings.
Contact an Asphalt Zipper representative today to learn how to upgrade your equipment and increase your job site efficiency today. By reducing taxable income, you can conserve capital, investing in essential resources and driving company growth.