Why do businesses buy equipment and other items at the end of a tax year?

Answer 1

They may have a capital equipment budget that they have not used. A branch of a large corporation may lose the money if they don't spend it.

Or the company want to reduce their tax liability by increasing their costs before the end of the year.

Answer 2

Equipment purchases at the end of the year are often motivated by Section 179 of the tax code. Business are allowed to deduct the entire cost of the equipment under certain circumstances.

By the end of the year, businesses know whether they will qualify and benefit from the Section 179 deduction.

Nonequipment purchases may be fully deductible, but if a business makes unusually large purchases of consumable supplies for example, the full deduction may be disallowed since it was not ordinary and necessary for the operation of the business during that tax year.

Answer 3

Gross Income-Expense= Gain (Loss), so you see, if the businesses have a higher income & lower expense, gain is recognized (Net income), so the business have to pay taxes. However if the businesses have higher expense, they can have losses, which means not taxable. One important thing is in order the business expenses to be deductible, the expenses has to be ordinary and necessary. In case of the business is audited by the IRS, they have a burden to proof the expense was ordinary and necessary to buy.

Answer 4

usually businesses that sell items do clearance sales at the end of the year so they don't pay taxes on their in stock items and businesses looking to buy items are trying to get rid of some of their profit so they don't pay taxes on it.