Congress extends the amount that small businesses may write-off for capital expenditures: $500,000!
Business Equipment
Business owners who acquire equipment including machinery, computers, and other tangible goods, usually prefer a substantial deduction in a single tax year, rather than a little at a time over a number of years. This accelerated deduction is known by its section in the tax code: a Section 179 deduction. An extension of The Small Business Jobs & Credit Act of 2010 provides key tax incentives for investments in new business equipment. This legislation gives business owners additional tax deduction and depreciation opportunities through December 31st, 2012.
The Tax Code Section 179 deduction for qualified equipment has recently been extended. This means that businesses can write off up to $500,000 of qualified equipment within the 2010 and 2011 tax years. This benefit applies to qualified new equipment acquired and placed in service after September 8th, 2010 and before January 1st, 2012.
Bonus Depreciation
The law also maintains a 100% bonus depreciation deduction plus the normal accelerated depreciation on the balance of the cost.
Benefits of a Non-Tax/Capital Lease
The benefit of a Non-Tax/Capital Lease is that it can take advantage of Section 179: expense up to $500,000 if the equipment is put in use in 2011. In addition, you may depreciate any excess on the depreciation schedule for that asset. Examples of Non-Tax/Capital Leases include a $1.00 Buyout, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease.
Example: Assume you finance $600,000 worth of business equipment, put it in use in 2011, and take advantage of Section 179. Your tax savings could be significant:
Equipment Cost: |
|
|
|
-Section 179
-Bonus Depreciation* |
|
Total 1st Year Deduction:
|
|
Marginal Tax Rate**
(Assuming a 35% Tax Bracket) |
|
Bottom Line Equipment Cost:
(After Tax Savings) |
|
*100% bonus depreciation after Section 179 deduction.
**Tax savings are assuming a 35% tax bracket.
The sample calculation shows how taking advantage of Section 179 can significantly lower the true bottom line cost of equipment ownership from $600,000 to $390,000.
For the specific impact to your company, please contact your tax advisor.
Tax Code Section 179 & Election to Expense Detail
This expense deduction is provided for taxpayers (other than estates, trusts or certain non-corporate lessors) who elect to treat the cost of qualifying property as an expense rather than a capital expenditure. Under Section 179, equipment purchases, up to the amount approved for a given year, can be expensed (deducted from taxable income) if installed before January 1st, 2012. Non-Tax leases qualify for this deduction in their year of inception. Any excess above the expensed amount can be depreciated depending on the equipment type. Not all states follow federal law. Contact your tax advisor for further detail or visit www.irs.gov for specific detail.
Act now!
To take advantage of the incentives and the substantial tax savings, your business equipment must be put in use by year-end. Please contact your tax advisor to learn about the specific impact to your business.
Interested in learning more? We’ll provide you with a free consultation and extend finance solutions so you can acquire the business equipment you need. Contact us today!
- Apply today to secure your 2010 tax savings or contact your Finance Officer at (888) 758-8880
Helpful Links:
IRS Section 179 Information
2009 Tax Calcuator
Frequently Asked Questions:
1. How can I lease equipment?
2. What questions should I ask before signing a lease?
3. What is the difference between a loan and a lease?
4. What are the benefits of leasing?
5. What are the tax benefits of leasing?
Glossary of Terms
Search our Glossary of Leasing Terms
