If this same site also undertook a tank upgrade and new price signs, the $350,000 spend could become $650,000. Bonus depreciation kicks in above $500,000 and allows c-store business owners to deduct 50% of the amount between $500,000 and $2 million as first-year depreciation. In this example, the retailer could deduct $500,000 at 100%, and $150,000 at 50%, for a total 2017 deduction of $575,000. At a 30% tax rate, this would yield $172,000 of tax and cash-flow benefits.

Act now

It is important to note a couple of things as you consider how to use these strategies for your business:

• The 50% deduction for bonus depreciation falls to 40% in 2018 and 30% in 2019 under the current tax act. If the proposed changes by the Trump administration to the tax act result in lower corporate taxes, the value of depreciation may be lower, resulting in the after-tax cost of equipment increasing by more than 25%.
• At this time, it’s unclear if Section 179 or bonus depreciation will survive any changes to the tax act. It is possible that tax-code revisions will eliminate these incentives to boost near-term tax revenue to help offset the effect of lower corporate tax rates.

The Wall Street Journal recently pointed out that “most midsize and smaller firms pay much higher rates” than larger corporations. Section 179 and bonus depreciation are incentives designed to benefit smaller companies. Consider using them while there’s still time this year, and while they are still available.

Chris Santy is president of Patriot Capital. Reach him at chris.santy@patcapfinance.com.

Patriot Capital, a division of State Bank and Trust Co., specializes in enabling entrepreneurs to succeed by providing hassle-free equipment financing in the retail and commercial-fueling verticals and other retail and manufacturing industries.

Working with its customers to enable them to optimize their financing and capital structures, Patriot Capital is the leading provider of capital equipment financing and leasing to NACS (National Association of Convenience Stores) and SIGMA (Society of Independent Gasoline Marketers of America) members.