Firm News

October 26, 2018

Rich Middleton and Mike Engleman Clarify the New Tax Law for Purchasing Equipment

Associate Partner Rich Middleton, CPA was featured in the article “Great time to buy: New tax law brings big deductions for buying used construction equipment” for Aggregates Manager ( on September 21, 2018.

Though the benefits of 179 and bonus are similar, there are some significant differences.

Another difference: 179 is limited to taxable income. So if you report a loss, you don’t qualify. But companies with an income loss can still deduct bonus depreciation, according to Richard Middleton, partner with Alloy Silverstein CPA firm in Cherry Hill, N.J.

“So that’s a big advantage,” Middleton says. “That’s something someone should consider when they’re deciding whether to use 179 or bonus depreciation.”

First, by taking 179 or bonus depreciation, you can’t depreciate that equipment after the first year.

“The benefit is you buy something, and you can write it off immediately, which saves you the taxes for that current period, and you’re not spreading the cost out over five years or seven years,” explains Middleton. “The problem with writing everything off in that initial time period is you’ve got no depreciation expense going forward, unless you buy more equipment.”

“You really have to know what’s going on with your particular state,” Middleton says. “And if you’re a contractor that’s doing business in multiple states, that becomes a consideration, because you’ve got potentially different rules for all the places. Planning is just so critical in all these decisions.”

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Associate Partner Mike Engleman, CPA was featured in the article “High demand, backlogs add stress to year-end new equipment buys” for the November 2018 issue of Equipment World Magazine (

With new equipment backlogs, however, timing becomes paramount because to claim any deduction this tax year the equipment must be “placed into service” by December 31st.

“You have to have possession of the equipment and it has to be ready to be placed in service,” agrees Mike Engleman, CPA and associate partner at Alloy Silverstein Accountants and Advisors. “There’s no way around that.”

And there’s the conundrum. Despite the best intentions of manufacturers and dealers, new equipment may get caught in the pipeline and that December 31st delivery date can’t be met.

Which is why both Sibley and Engleman advise contractors not wait until December to talk to their tax advisors. If your shiny new machine just can’t reach you in time, you do have alternatives to lower your tax bill, including buying used (again, now part of bonus depreciation), buying other cap ex items such as computers and putting money into a retirement plan.

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