The beginning of 2019 saw the implementation of new business deduction rules put in place by the 2017 Tax Cuts and Jobs Act. While some of these new rules can hurt drilling-related businesses, there are several ways to stretch your capital and save through business growth.
Drilling businesses have a lot of up-front costs to take into consideration, including but not limited to equipment purchases, fuel, and maintenance. Businesses have the choice to take a business standard mileage rate of 58 cents per mile, up 3.5 cents from 2018. But in his article “Drilling into Money Not Boring” in the August 2019 edition of WorldWide Drilling Resource magazine, Mark E. Battersby says that may not be the best option.
“The rules for Section 179 expensing means the cost of qualified vehicles and other property which can be expensed in 2019 is $1 million (up from the earlier $510,000 limit). There is also a silver bullet called ‘bonus depreciation.’ For 2019, bonus depreciation applies to 100% of the cost of qualified property, whether new or used – with no limit.”
Purchasing the drilling equipment isn’t the only expense that can save you come tax time. If eligible, drilling businesses can take a tax credit, or even a refund, for the fuel used in off-road applications. Equipment depreciation rules have new three-year limits, with the biggest deduction available during the first year. With the ability to take depreciation credit on new and used equipment, purchasing used drilling equipment can be a money-saver and the front end with lower up-front capital, and on the back side through a higher first-year deduction.
Talk to your qualified financial professional about how the newly-implemented Section 179 rules can benefit your business, then call SIMCO to see how we can help you reap those benefits through purchasing reliable, quality drilling equipment.
Call our sales team at 800-338-9925 to learn more, get a free quote through our online Contact page and start building your ideal water well rig today!