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Tax law offers chance to save on equipment
Business owners including trucking companies and owner-operators can save a significant amount on equipment purchases through the end of the year thanks to a special tax deduction.
The Section 179 Tax Deduction allows businesses to deduct 100 percent of an equipment purchase on their 2011 tax return, up to $2 million in purchases and $500,000 in deductions.
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Penton Online Auctions offered the following example of how the Section 179 deduction can help business owners save money: Purchase $40,000 worth of equipment, deduct the entire amount and save $14,000 in taxes, assuming a tax bracket of 35 percent and sufficient offsetting earnings. After the tax deduction, the lowered cost of the equipment is $26,000.
“Many people have heard about Section 179 and think it’s a complicated tax strategy for big companies making big capital investments,†Penton’s website says. “It’s not complicated, and even the smallest company or partnership stands benefit if their purchases qualify.
“Your business can lease or finance equipment and then take the IRS Section 179 expense deduction, so you’re saving the cash outlay currently, but you’re deducting the entire purchase amount. This means that the amount you save in taxes can actually exceed your loan payments, enhancing the company’s cash flow and getting the equipment you need now.â€
The deduction applies to both new and used equipment purchased through Dec. 31, 2011.
Section 179 limits were increased by the ‘Jobs Act of 2010’ - allowing businesses to write-off up to $500,000 of qualified capital expenditures subject to a dollar-for-dollar phase-out once these expenditures exceed $2 million.
Bonus Depreciation was also increased to 100 percent by the ‘Tax Relief Act of 2010’ — allowing businesses that exceed the $2 million cap to write-off 100 percent of qualified assets using first year Bonus Depreciation. Also, small businesses that are not profitable in 2011 can use 100 percent Bonus Depreciation (on new equipment only) and carry-forward the loss to future profitable years.
For more information on the Section 179 Deduction, contact your financial adviser or accountant or visit the Internal Revenue Service website at
www.irs.gov
.
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