With Labelexpo fast approaching, many label converters are mulling over new equipment acquisitions and will be in Chicago with checkbooks in hand. Whether it’s a new digital or flexo press, finishing machinery, or anything else that will enhance productivity and product offerings, there’s no place like Labelexpo to see and compare the latest in printing and converting machinery.

Equipment acquisitions are often major capital investments. However, by understanding Section 179 of the IRS tax code, US label manufacturers can benefit when it comes time to buy.

L&NW recently caught up with Linda Reed, vice president, business development, for Connext Financial LLC, a financial services firm that specializes in equipment financing. Linda understands the needs of US label manufacturers of all sizes, and here she provides some insight into understanding and taking advantage of Section 179 and the Depreciation Bonus.


L&NW: Linda, for those that may be new to equipment acquisition and financing, can you provide some background on Section 179 and the Depreciation Bonus?

Linda Reed: When the Stimulus Act was created in 2008, Section 179 was geared to encourage small business to invest in equipment needed to grow. Over the last few years, Congress raised this deduction to $500,000, but on January 1, 2015, this deduction was reduced to $25,000. The Depreciation Bonus allowed a company to deduct 50% of new equipment cost after using the Section 179 deduction. However the Depreciation Bonus expired on December 31, 2014.

On December 22, 2015, Congress extended and enhanced these incentives thereby encouraging companies of all sizes to grow by purchasing, leasing or financing new efficient plant equipment. Both tax incentives are retroactive to January 1, 2015.


LNW: What are some of the qualifications for Section 179?

LR:  For Section 1789, the 2015 deduction limit is $500,000, and the 2015 spending cap on cumulative equipment purchases is $2,000,000. For purchases over $2,000,000, this incentive will be reduced dollar for dollar. Also, equipment must be installed by the end of the calendar year.

Qualifying equipment can be new or used.  It can be property attached to your building that is not a structural component of the building, such as a printing press, for example. It can also include, software, computers, business vehicles weighing in excess of 6,000 pounds, office furniture, office equipment and more.


LNW: What are examples of non-qualifying property for Section 179?

LR:  Non-qualifying property includes real property defined as land, buildings, permanent structures and the components of the permanent structures (including improvements such as paved parking areas, fences etc.), air conditioning and heating equipment, property used outside the United States, property that is used to furnish lodging, and also property acquired by gift or inheritance, as well as property purchased from related parties deduction. In other words, no, you can’t sell equipment to yourself and qualify for Section 179.


LNW: How can the Depreciation Bonus benefit a label company?

LR: Bonus Depreciation enables a company to deduct a substantial amount of a new asset and will be in effect through the end of 2019 with a gradual phase-out as follows:

• 50% in 2015 through 2017
• 40% in 2018
• 30% in 2019

LNW: What are the qualifications for bonus depreciation?

LR: Equipment or property qualifies for bonus depreciation only if it is new. If the newly purchased equipment or property contains used parts, it is still treated as new if the cost of the used parts is less than 20% of the total cost of the property/equipment.

It also qualifies if the equipment has a useful life of 20 years or less. This includes all types of tangible personal business property and software you buy, but not real property, and you purchase it from someone unrelated to you – it can’t be a gift or inheritance.

Keep in mind that bonus depreciation is optional. You don’t have to take it if you don’t want to. But if you want to get the largest depreciation deduction you can, you will want to take advantage of this option whenever possible.


LNW: How does one elect the Section 179 Deduction, and can you point us toward the correct forms to fill out?

LR: Whether you lease, finance or purchase the equipment, it must be placed in service by the calendar year-end. And you must elect to take the deduction when you file your tax return for the year. This is not an automatic tax deduction.

Section 179 is taken on an item by item basis, and you do not have to use it on assets purchased during the year if you do not wish to do so.

Here are links to IRS Form 4562:
Download IRS form 4562 for tax year 2015.
Download instructions for IRS form 4562 for tax year 2015.


LNW: Can you explain extensions and amended returns?

LR: Initially you were not allowed to claim Section 179 for previous tax years. However, under Rev. Proc. 2008-54, you are now able to amend and elect Section 179 if you previously did not for tax years beginning after 2007 through the current year. You may claim Section 179 deductions up to the due date – including extensions – for filing your taxes for the tax year you are claiming the deduction.


LNW: Is there anything else US label manufacturers should know when it comes to Section 179 and the Depreciation Bonus?

LR: I suggest consulting with your CPA. The tax incentives are retroactive to January 1, 2015, so keep complete records of the business equipment you leased or purchased during the year, including where you acquired the equipment from and the date the equipment was acquired and placed into service.

Also, if filing for any particular year, the equipment must have been placed into service between January 1 and December 31 of the year you are filing for.

And I urge those considering label manufacturing equipment purchases to call me. Together we can create a program that fits your budget and explore how these tax savings can help pay for the new equipment.



Linda Reed can be reached by phone at 817-421-9345 or email at [email protected]


Here’s some more information on Connext: