An LED sign is an affordable and effective way of building brand awareness, communicating with customers, and bringing people into your business. They are an excellent advertising method for just about any small business.
Not only are LED signs good for your business, but they may be tax exempt, making an already affordable piece of equipment even cheaper. Here, we’ll walk you through how you can get a tax exemption for your LED sign. The law is fairly straightforward, making getting an exemption for your LED sign relatively painless.
Why Are LED Signs Tax Exempt?
The basic tax law that covers business equipment tax exemptions is called section 179.
This law allows businesses to write-off equipment purchases up to a certain limit, provided that the equipment is mostly used for business purposes. The law was designed specifically to give small businesses tax relief, and make it easier for them to buy the equipment they need without having to wait years to pay it off.
You may have heard of section 179 a few years ago as the “Hummer Deduction.” That reputation developed because some businesses were using the law to get exemptions on expensive vehicles, including Hummers.
In recent years, the law has been cut back to avoid write-offs like this and focus instead on equipment that is truly for business purposes.
Are The LED Signs My Business Buys Still Exempt Under Section 179
However, section 179 still applies to many different areas, and can be effectively used by small businesses for a wide range of equipment.
If you are thinking about buying LED signs for your business, they are still covered by section 179, meaning you will likely be able to deduct the full amount of any purchase, as long as the signs are used mostly for business purposes.
Advantages Of Using Section 179
One of the best features of section 179 is that it allows businesses to deduct the entire amount of a piece of equipment the year they buy it.
In the past, this would have to be done over 5 years. For example, if you bought 10 LED signs, for $2000, you would only be able to deduct $400 per year. With section 179, you can deduct the whole amount right away, which can make it easier to make large equipment purchases.
Since the deduction limit is $1,000,000, that means that almost all small businesses will be able to write-off all of their equipment purchase for a given year. And when it comes to LED signs, it means that you will likely be able to deduct the full cost of your purchase.
Other Limits To Section 179 Tax Exemptions
Because it was designed for small businesses, the deductions phase out after you spend a certain amount of money. You can only write off $1,000,000, and after you spend $2,500,000 in total, the amount that you can deduct decreases.
If you spend over $3,500,000, you will not be able to write-off any purchases with section 179. This limit, however, will not apply to most small businesses, as it is much more than they typically spend on equipment.
Who Can Use Section 179?
The law is designed to be very broad, so it includes just about any small business. It applies to any business that purchases, finances, or leases equipment. That’s the only requirement to make a deduction using section 179.
The law also includes a wide variety of equipment and services, from vehicles to software. No matter what type of LED sign you buy for your business, it will be covered by section 179.
Is There A Difference Between Section 179 And Bonus Depreciation?
The laws are somewhat similar, and some business may take advantage of both to deduct as much as possible every year. In general, however, bonus depreciation applies to the purchase of new equipment. Section 179 applies to used and new equipment, allowing for a wider range of equipment to be deducted.
Bonus depreciation is usually used by businesses that spend more than $2,500,000 annually to cover the equipment that they cannot deduct using section 179. For most small businesses, however, this limit won’t be much of an issue.
If you are buying a new LED sign, you may be able to use bonus depreciation in place of section 179. However, this exemption is more frequently used by large companies that spend millions of dollars on equipment annually. For small businesses, section 179 is the better option, and will likely cover all of the equipment they purchase.
Your LED Sign Must Be Used Mainly For Business Purposes
If you do buy an LED sign and write it off with Section 179, the only requirement is that it be used for business use more than half the time.
If you are a very small business and you use your equipment both for personal and business purposes, make sure that you are using you are using it mainly for business purposes, or risk an audit. Although you may get away with it, you don’t want to get caught deducting personal items using business tax laws. This could lead to fines that are far larger than the money you saved.
Every Business Could Gain From An LED Sign, No Exemptions
Nearly every business can benefit from an LED sign. They are one of the best options for driving customer interest, communicating with your target audience, and building your brand. And best of all, they are affordable and customizable. With just one digital sign you can have a customized advertising plan for years.
Businesses with attractive signs are more likely to get customers to come in from the street, and they also help any interested customer find your business. That’s why you should get one today.