From: Barfield Management .com
"If you’re considering the possibility of purchasing business or farm equipment* in the next four to six months and cash is running low, you might consider initiating a lease or purchasing it on credit by December 31st. IRS Tax code “Section 179” allows qualifying property to be expensed entirely or a higher portion to be expensed along with regular depreciation. The Section 179 limit for 2008 is $250,000 (up from $108,000 in 2007). Also, in 2008 there is a special depreciation allowance of 50% of the property’s depreciable basis after any section 179 deduction and before figuring your regular depreciation deduction.
Section 179 deductions are also limited by taxable income derived from the active conduct of all trades or businesses including: wages, salaries, partnership income, corporation shareholder income, and gains from sales of business assets. It does not include rental or investment income. A husband and wife, whether filing joint or separate returns, are treated as one taxpayer for the $250,000 limit.
You can find tax savings calculators on the Internet, but basically you can figure 35% (15% FICA and 20% Income) tax savings on the amount you choose to expense. For instance, if you’re considering the purchase of office equipment totaling $4,000, your tax savings would be approximately $1,400. In most cases that tax savings is greater than the interest amount you will pay over the course of the lease or loan. Of course you need to avoid loan scams that charge an extremely high rate of interest (i.e. payday loans, car title loans, etc.)
In the case of a lease that is initiated in prior to January 1st, you have the option to expense the entire amount in the year of initiation or deduct the payments over the course of the entire lease.
*Vehicles have additional limitations; please talk to your tax advisor if you’re considering the purchase of a business vehicle."
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As the picture says... time is running out! If you are considering a capital equipment purchase I would appreciate the ability to show you the effects the section 179 change will have on your 2009 bottom line. Email me: apaladino@allmediacapital.com
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