NEW YORK, NY --- Now that tax day has come and gone…let us save you some money on your LED. The LED display industry has seen tremendous growth in recent years, due in large part to improving technologies and vastly reduced costs. Given these factors alone, it's a great time to take advantage of the benefits of an LED display. However, there are new federal tax incentives for LED signage, providing buyers the most compelling reasons to finally take advantage of the benefits of LED display technology. With these incentives, you as a buyer stand to pay less out of pocket, greatly reducing the cost of your LED sign, which itself can become a huge revenue generator.
This is a big opportunity for customers who install an LED display in 2016.
LED signs qualify under Section 179 as tangible personal property. Tangible personal property is defined to include property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs.
What Are The Benefits?
To sum it up, any purchase of new signage in 2016 that is also placed into service during 2016 will qualify for the following:
•A section 179 deduction of $500,000 for purchases of $2.0 million or less. Any purchase that is over $2.5 million will not qualify for ANY section 179 deduction. A purchase between $2.0 million and $2.5 million qualifies for a reduced amount.
•A bonus depreciation deduction equal to 50% of the remaining cost of the signage.
•A normal depreciation deduction (the value depends on how the company depreciates its assets)
How Do The Benefits Save Cash?
Depreciation is a reduction in the value of an asset. Businesses are allowed to depreciate an asset to account for normal wear and tear over time. At year end, depreciation expense is subtracted from a company's net income when determining the amount of tax to pay. Therefore, any increase in deprecation reduces the amount of taxable income, saving a company cash.
Below is an illustration to show the actual cash effect of this opportunity:
•Cost of the LED sign: $1,500,000 (assumed)
•Section 179 deduction: $500,000 (max)
•Bonus depreciation deduction: $500,000 (50% of the remaining cost)
•Normal 1st year depreciation: $100,000 (varies depending on the company)
As you can see, the total 2016 deduction would be $1,100,000, leaving the LED sign with a value of $400,000. Assuming the company is in the 35% tax bracket, the cash SAVED as a result of the total deduction is $385,000 (the value of the deduction multiplied by 35%). As a result, a sign costing $1,500,000 actually only costs the company $1,115,000.
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