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Sales are the lifeblood of any successful equipment vendor business, as they provide the necessary capital to purchase inventory and cover operational costs. When done right, sales can be a powerful tool for moving inventory, meeting sales goals, and building long-term customer relationships. However, selling can be challenging, even for a vendor business that stocks the latest and most innovative equipment, vehicles, software, or technology.
One effective sales tool that forward-thinking equipment vendors deploy is the Section 179 tax deduction. Vendors mention the myriad benefits of this tax incentive to customers, which often helps reduce the path to purchase and results in more sales. In this Balboa Capital blog post, you will learn more about Section 179 and how you and your salespeople can use it to close more deals and increase profits.
What is Section 179?
Section 179 is a federal tax deduction that allows businesses to deduct the total or partial purchase price of qualifying equipment, vehicles, machinery, software, and other tangible assets on their tax returns with Internal Revenue Service (IRS) Form 4562. Not all assets are eligible for the deduction, so business owners must consult an accountant to confirm.
In 2024, the Section 179 deduction limit for qualifying equipment purchases is $1,220,000, and the phase-out threshold is $3,050,000.1 Plus, bonus depreciation is 60% for equipment placed into service from January 1, 2024, through December 31, 2024.2 As you can see from these numbers, Section 179 presents business owners — your customers — with an opportunity for some tremendous deductions come tax time.
Make Section 179 part of your team’s training.
Your equipment vendor business can maximize profits and sustain long-term success with the right strategies. In addition to your business-to-business (B2B) marketing initiatives and website, you should have internal strategies for educating and training employees. This can ensure that your salespeople have extensive knowledge of the equipment you sell and its benefits and features.
You can’t assume that everyone on your staff understands what Section 179 is and how it works. Therefore, it would be advantageous if one of your employee training sessions featured an overview of Section 179 and how it benefits your end-user customers. When your salespeople understand this tax deduction, they can mention it to customers and feel confident answering questions about it. Moreover, they will realize how it can help them close more deals.
It will also help if you send an email to your salespeople that features a brief explanation of what Section 179 is, how it works, and what the current year’s deduction limit is.
Putting it into action on the sales floor.
Every vendor salesperson has a way of interacting with customers and helping them choose the best equipment for their business’s needs and budget. Customers will typically be interested in the equipment’s features, benefits, and capabilities and how much it costs. Equipment warranty, delivery, and installation, if applicable, are also talking points.
Most business owners are familiar with expenses that can be deducted from their taxable income, such as marketing, business insurance, legal fees, and rent. However, regarding business equipment, they might not be fully aware of the potential deductions under Section 179. That said, you and your salespeople should mention Section 179 after you have covered the equipment’s features, benefits, and price, and your customer is nearing the finish line with their purchase.
If you mention Section 179 right when your customer enters your showroom or lot, you might sound pushy or desperate for the sale. It is best to welcome them and let them know you are available if they have questions about the equipment you sell or need advice and recommendations. Take your time, and don’t rush your customers through the buying process.
Over time, you will have a good sense of when to bring up Section 179. For some customers, it might be during the initial discussion about the equipment they are interested in, and for others, it might be at the point of purchase.
Conclusion
Section 179 can be a great sales tool for your equipment vendor business, as it incentivizes customers to purchase the equipment you sell. By mentioning Section 179 and its benefits, you and your salespeople can make the equipment more attractive to potential buyers while helping them save money on their taxes. Just advise customers to contact their business accountant if they need more information about Section 179 and how it applies to their business.
Reference:
- https://hoodcpas.com/understanding-tax-depreciation-rules-for-2023-and-2024-bonus-depreciation-section-179-explained/
- https://www.nolo.com/legal-encyclopedia/50-bonus-depreciation-likely-extended-2014.html
Section 179 limits and information in this blog article are for illustrative purposes only; the Section 179 limits and information provided are subject to change by the IRS.
Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses the Internal Revenue Service (IRS), Hood CPAs, or NOLO. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.