bake - April 2013 - 14

tax tips

Saving isn’t
vi g sn’t
alwa
alwa s h
always the best
est
s
wa o row
way to grow
o
a business.
i ess.

Maximizing Interest Deductions
Section 179 deductions can help you outﬁt your retail bakery

advises retail bakers use Section 179 as an aid for reinvesting.

with the equipment it needs to operate efficiently, while at

“You need to reinvest in your business each year,” Concannon

the same time saving you money on taxes. It all depends on

says. “This year we bought three brand new Nissan vans. We

whether you buy or rent equipment, and correctly making that

had older Chevys, but we were only getting 10-12 miles per

decision requires careful attention and planning, and should

gallon. We got new ones with V6’s and better gas mileage,

often be approached on a case-by-case basis.

plus that gave me a tax deduction of basically $80,000, and I
can write it all off in one year, as long as the vehicles are over

When purchasing outright, most small businesses can write

$6,000 each.”

off the entire cumulative cost of equipment, software and
vehicle purchases on the 2013 tax return — so long as that

Concannon says he chose to buy new vehicles because he

amount totals less than $500,000. This aspect of Section 179 is

would’ve had to take the normal depreciation over the course

designed to motivate small businesses to spend money rather

of a few years had he bought used. Other situations call for

than save it, presumably stimulating the American economy.

used equipment. “Some of this foodservice equipment is so
expensive these days, but you can usually ﬁnd a piece for a

To qualify for Section 179, your business must purchase,

10th of the cost used. Of course you don’t get the tax exemp-

ﬁnance, and/or lease less than $2,000,000 in new or used

tion, but the savings isn’t in that — the savings is in the reduced

business equipment during tax year 2013. The Section 179

labor cost or increased efficiency you get from that item.”

deduction is reduced when purchases pass the $500,000
limit. Purchases that exceed this $500,000 mark must take a

He stresses the fact that saving isn’t always the best way to

50% bonus ﬁrst-year depreciation as opposed to the typical

grow a business. “You usually end up paying more in taxes

20% each year over ﬁve years. Bonus depreciation covers new

when you save instead of reinvesting. You need to invest

equipment only.

in equipment to grow income for employees and keep the
government from eating you up on taxes. Say you make

Mike Concannon, owner of Concannon’s Bakery in Muncie, IN,

$100,000 in a year. You might want to spend $20,000 on

opened a new location for his bakery in 2009 and chose to buy

equipment so that those new pieces can help you make

certain items new and others used, primarily for tax reasons. He

$120,000 the next year.”

14 < APR 2013 | bakemag.com
http://www.bakemag.com
bake - April 2013

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