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In a business landscape where technology is constantly evolving, it's crucial for companies to make intelligent investments that offer solid returns. However, the financial burden of acquiring new technology like drones can be daunting, especially for small businesses. That's where Tax Code Section 179 comes into play—a provision that could significantly benefit your bottom line.
What is Tax Code Section 179?
Section 179 of the U.S. Internal Revenue Code allows businesses to deduct the total purchase price of qualifying equipment, like drones, purchased or leased during the tax year. Traditionally, business assets are depreciated over multiple years, meaning only a percentage of the cost could be deducted each year. Section 179 lets you write off the entire amount in the year of purchase, up to a limit of $1,160,000 for 2023, provided that the total amount of equipment purchased does not exceed $2,890,000.
The Case for Drones in Business
Drones, specifically those equipped with a LiDAR sensor, are a game-changing technology, particularly for industries that rely on land mapping & surveying. The upfront investment for a LiDAR drone can range between $15,000 to $150,000, depending on the specific configurations and additional features.
While this might seem steep initially, the long-term cost savings and operational efficiencies are profound. For instance, drones can drastically reduce the time spent on data collection, thereby lowering labor costs, especially for jobs with heavy vegetation. Moreover, the accurate data obtained from drones can improve decision-making, thereby mitigating risks and avoiding expensive mistakes.
The Financial Upside of Tax Code 179
So, how does Section 179 translate to real-world savings when purchasing a drone? Consider this example:
Let’s assume you are in the 32% corporate tax bracket, and you decide to invest in a LiDAR drone for $50,000. Under Section 179, the entire purchase price can be written off, which equates to a cash savings of $16,000 (22% of $50,000).
Thus, the actual 'cost' of the drone, after-tax savings, would be $34,000—a significant reduction.
Additionally, the cash flow generated from the operational efficiencies and cost savings could further offset the initial investment. The drone might pay for itself within a year, particularly if you are in an industry that requires frequent land surveying or mapping services.
Try out our Section 179 Calculator below and find out how much you could save.
Changing Perceptions
It's not uncommon for business owners, especially those who have been in the industry for several decades, to be skeptical about new technology. Concerns often revolve around the perceived complexity of implementing new systems or fears about technology replacing human jobs. But when the financial merits are so compelling—bolstered by tax incentives like Section 179—these perceptions may need to be revisited. Adopting drone technology is not about replacing human skills but rather augmenting them. It’s about doing more with less and staying competitive in an ever-evolving market.
Conclusion
Tax Code Section 179 offers an immediate financial benefit for businesses willing to invest in technology. For companies in the AEC industry, drones yield both immediate tax savings and long-term operational efficiencies. It's not just about keeping up with technological advancements—it's about leveraging them for a stronger, more efficient business model. This tax year, take advantage of Section 179, and invest in technology that will not only give you an immediate tax break but also set your business up for future success.
