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Reduce Equipment and Construction Costs Through Tax Breaks, Favorable Loans

Posted by Concannon Miller on Tue, Aug 29, 2017

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Tax Benefits - Businesses- gold sign copy.pngBuying new equipment – or on a grander scale, a new facility – is generally a positive indicator for a business. But there’s a considerable downside – the cost.

Equipment purchases often require significant cash on hand, either to purchase the equipment in the case of more minor items or to secure bank loans for larger purchases.

But your own cash or bank loans don’t have to be your only two options when it comes to business purchases. There are many low-interest loans available for construction, renovation and equipment purchases.

There are also several tax strategies available to refund some of your equipment and construction costs.

Tax Strategies

Section 179 Depreciation for Equipment Purchases: You may be able to immediately write-off any equipment purchases up to $500,000. Congress recently made this tax benefit permanent, allowing for far greater tax planning.

Bonus Depreciation for Equipment Purchases: This is for new equipment only (Section 179 can be for new or used), but it can add up to big savings. Bonus Depreciation allows you to write-off 50 percent of the asset cost in the first year, and then you can depreciate the other 50 percent over five-to-seven years. This benefit will be reduced to 40 percent in 2018 and to 30 percent in 2019.

Cost Segregation Depreciation: Did you incur costs during the building and construction or purchase of your facility? You can likely accelerate some deductions with a cost segregation study, an engineering-based analysis of the costs associated with the acquisition, construction, or renovation of a building. Learn more about cost segregation depreciation here.

READ MORE: The 10 Top Tax Benefits for Businesses

Construction, Renovation and Equipment Funding

U.S. Low-Interest Loans: The U.S. Small Business Administration offers low-interest loans that can be used for working capital, machinery, equipment and facilities:

  • 7(a) Loan: The SBA’s most popular loan offers loans of up to $5 million, with the average loan amount in fiscal year 2015 being $371,628. Interest rates range from 0% for loans under $150,000 to 3.5% for loans more than $700,000.
  • Microloan: The Microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.
  • Real Estate & Equipment Loans: SBA Grow Loans (504): This loan program provides financing for major fixed assets such as equipment or real estate.


Pennsylvania Industrial Development Authority Low-Interest Loans:
PIDA offers low-interest loans and lines of credit for eligible businesses that commit to creating and retaining full-time jobs and for the development of industrial parks and multi-tenant facilities. The funding can be used for land and building acquisitions, construction and renovation costs, machinery and equipment purchases and working capital and accounts receivable lines of credit.

This funding is available to the manufacturing, construction, retail and service industries. Both LVEDC and the Governor’s Action Team can assist local businesses in obtaining PIDA funds.

New Call-to-action Northampton County Low-Interest Loans:

Northampton County through Northampton County General Purpose Authority  offers low-interest loans to boost business growth in the county. The authority’s business financing programs include:

Economic Reinvestment Loan Program: These low-interest loans are intended to help support the creation and retention of jobs through business preservation and expansion. The loan has a $250,000 maximum and can be used for machinery or equipment purchases or building renovations, expansion or purchase.

Business Boost Loan Program: These low-interest loans are intended to serve as gap financing in conjunction with conventional financing. The loan has a $150,000 maximum and can be used for operating capital, machinery or equipment purchases or building renovations, expansion or purchase.

Loan and Development Fund: These low-interest loans are available to provide financial assistance to incentivize community development in Northampton County. The loan has a $100,000 maximum and can be used for job training in addition to machinery or equipment purchases or building renovations, expansion or purchase.

READ MORE: Job Creation Funding: How to Obtain Tax Credits & Grants

How to Apply

Concannon Miller is personally acquainted with the key personnel at these organizations and can help you navigate with various agencies and programs to determine the route for maximizing your opportunities to get your business on the path for greater success. Many of these organizations provide businesses with free or discounted assistance. Contact us here for more information.

Looking for more grant and tax credit opportunities? Check out our Business Guide for Growth, which offers details on more than 40 tax strategies, grants, credits, low-interest loans and other business resources to help companies grow. Download your copy here.

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Topics: Business tax planning

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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