Tax Benefits
Typically, if property for business has a useful life of more than one year, the cost must be spread across several tax years as depreciation with a portion of the cost deducted each year.
But there is a way to immediately receive these income tax benefits in one tax year. The provisions of Internal Revenue Code Section 179 allow a sole proprietor, partnership or corporation to fully expense tangible property in the year it is purchased.
And in 2003, tax-law changes made this option much more appealing by dramatically increasing -- from $25,000 to $100,000 -- the amount that can be written off immediately. This law is in effect through year 2007 and includes all depreciable equipment, even off-the-shelf computer software.
|
Before
Section 179 |
After
Section 179 |
|
| Equipment Purchase |
$45,000
|
$45,000
|
| 1st Year Write-Off Tax Code 179 |
$24,000
|
$45,000
|
| Normal 1st Year Depreciation (20% based on 5 year asset life) |
$4,200
|
0
|
| Total Deduction 1st Year |
$28,200
|
$45,000
|
| Marginal Tax Rate (Assumed) |
35%
|
35%
|
| Your Tax Savings |
$9,870
|
$15,750
|
** Consult your tax advisor regarding IRS Section 179 and all accounting procedures.
For more info see http://www.depreciationbonus.org
