In 2024, the United States government continues to offer incentives to encourage businesses to invest in new machinery. These incentives aim to boost manufacturing competitiveness, create jobs, and support domestic manufacturing and clean energy production.

Here are some notable ones:

Qualifying Advanced Energy Project Investment Tax Credit (the 48C Credit):

• This credit applies to facilities producing renewable energy assets and other property that reduces greenhouse gas emissions.
• The Inflation Reduction Act (IRA) expanded the definition of qualified energy projects to include components used in carbon capture, energy grid modernization, renewable fuel generation, electric vehicles, and recycling facilities.
• Manufacturers investing in qualified advanced energy projects can apply for an allocation of the 48C credit.
• The credit amount can be as high as 30% of eligible investment costs placed into service during the current tax year.
• Recipients can claim 48C credits on federal corporate income taxes.
• Unused credits can be sold for cash under the new IRA credit transfer provisions.

Section 179 Deduction:

• Under IRS Section 179, businesses can fully deduct qualifying equipment costs (up to $1,050,000 annually) in the current tax year instead of spreading it out over the equipment’s life.
• Bonus depreciation is allowed for amounts exceeding the Section 179 limit, allowing 100% deduction of new equipment purchases in the year of acquisition.

The eligibility requirements for the mentioned incentives:

Qualifying Advanced Energy Project Investment Tax Credit (the 48C Credit):

Eligibility:

• Businesses involved in advanced energy projects, including renewable energy, carbon capture, energy grid modernization, and recycling facilities.
• The project must reduce greenhouse gas emissions.
• Manufacturers investing in qualified projects can apply for the 48C credit.

Claim Process:

• Apply for an allocation of the credit.
• Recipients can claim the credit on federal corporate income taxes.
• Unused credits can be sold for cash under the new IRA credit transfer provisions.

Section 179 Deduction:

Eligibility:

• Businesses of any size.

• Qualifying property includes machinery, equipment, and vehicles used for business purposes.

• New or used property is eligible.

Annual Limit:

• The maximum deduction limit for 2024 is $1,050,000.

• Phase-out begins when total property cost exceeds $2,620,000.

Application:

• Businesses choose to take the Section 179 deduction on their tax return.

Tax Cuts and Jobs Act of 2017 (TCJA)

Businesses still have ongoing incentives to acquire and install capital equipment. The Tax Cuts and Jobs Act of 2017 (TCJA) made significant changes to both the Internal Revenue Code Section 179 and bonus depreciation. 

Section 179 allows businesses to expense the full purchase price of qualifying equipment and/or software purchased during the tax year. When you buy a piece of qualifying equipment, you may be able to deduct the full purchase price on your business income tax return.

These changes continue to be in effect for 2024 and when used together may allow businesses to deduct up to 100% of capital purchases.

However, it will only be 100% if the amount of the equipment is under the phase-out threshold and can be expensed solely under Section 179.  If it's over the limit and/or threshold, bonus depreciation will kick in, which is only 60% for 2024.

Before the TCJA, the government capped business taxpayers’ Section 179 deduction at $500,000, with a phase-out beginning at $2 million. The new Act raised the deduction limit to $1 million and the phase-out threshold to $2.5 million, including annual adjustments for inflation. In 2024, the Section 179 benefits apply to small and mid-size businesses that spend less than $4.27 million per year for equipment.

Other tax credits available to businesses in 2024 are:

Continued Support for Renewable Energy and Energy Efficiency Tax Credits:

• Environmental sustainability remains a top priority for the government and businesses alike. Expect ongoing support for tax credits related to renewable energy projects and energy-efficient initiatives.

Growing Importance of Tax Credits for Employee Retention and Recruitment:

• As businesses focus on attracting and retaining talent, tax credits related to employee hiring, training, and development will continue to play a crucial role.

Potential New Tax Credits for Cybersecurity and Data Privacy:

• Given the increasing importance of cybersecurity and data protection, there may be new tax incentives aimed at encouraging businesses to invest in robust security measures.

Expanded Tax Credits for Small Businesses:

• The government recognizes the vital role small businesses play in the economy. Look out for enhanced tax credits specifically designed to support small business growth and innovation.

Tax Credits to Address Specific Industry Needs:

• Industry-specific tax credits may emerge to address unique challenges faced by sectors such as healthcare, technology, manufacturing, and agriculture.

The information provided by the Agency is for orientation purposes only, as companies are advised to consult their local tax experts for further clarification and guidance based on their specific needs and circumstances. As this article regards primarily federal programs, actual changes, updates and cancellation may occur which would not be reflected in this article, unless indicated.