Create Your Own Tax Break in 2009!
Congress extends the amount that small businesses may write-off for capital expenditures: $250,000!
Here’s how you may lower your true cost of business equipment:
Business owners who acquire equipment including machinery, computers, furniture 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. The 2009 law extends the amount of qualified property that a business can expense under Section 179 to $250,000.This incentive is for equipment placed in service by December 31, 2009 and is designed for small companies, so the deduction phases out when a business purchases more than $800,000 in one year. (Companies cannot write off more than their taxable income).
The law also maintains the bonus depreciation of 50% for qualifying assets. This bonus is in addition to regular first-year depreciation.
The benefit of a Non-Tax/Capital Lease is that it can take advantage of Section 179: expense up to $250,000 if the equipment is put in use in 2009. 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. The sample calculation shows how taking advantage of Section 179 can significantly lower the true cost of furniture ownership from $300,000 to $202,000.
For the specific impact to your companys next furniture purchase, please contact your acount representative or call 610-974-7990.
Assume you finance $300,000 worth of new business furniture, put it in use in 2009, and take advantage of Section 179. Your tax savings could be significant:
Furniture Cost Example: $300,000
1st Year Write Off: $300,000
($250,000 is the maximum Section 179 write-off in 2009)
50% Bonus Depreciation: $250,000
(On remaining value: $300,000 – $250,000 = $50,000; $50,000 x 50% = $25,000)
Normal 1st Year Depreciation: $5,000
(Depreciation calculated at 5 years = 20%; $25,000 x 20% = $5,000)
Total 1st Year Deduction: 280,000
($250,000 + $25,000 + $5,000 = $280,000)
Tax Savings Assuming Rate of 35%: $98,000
($280,000 x .35 = $98,000)
1st Year Net Cost after Tax Savings: $202,000
($300,000 – $98,000 = $202,000)
