Tax Code 179 Benefits of a Straight Machine Tool Purchase or Lease with $1.00 Purchase Option

Take advantage of Tax Code Section 179 and expense up to the amount allowed for the year the equipment is installed. You may depreciate any excess on the depreciation schedule for that particular asset.

President Bush signed the Economic Stimulus Package.  In addition to the individual benefits this bill, HR 5140, also provides two special incentives for 2008 business investments.

1.   Under Section 179 the limit on expense deductions for capital investments has been raised from $128,000 to $250,000.00.

2.   Also, a first year bonus depreciation of 50% of the investment value is included.

Tax Code Section 179 & Election to Expense

An expense deduction is provided for taxpayers (other than estates, trusts or certain non-corporate lessors) who elect to treat the cost of qualifying property, called Section 179 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 by December 31st. 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.

The election, which is made on Form 4562, is for the tax year the property was placed in service or an amended return filed within the time prescribed by law. The total cost of property that may be expensed for any tax year cannot exceed the total amount of taxable income during the tax year. Section 179 property is property that you acquire by purchase for use in the active conduct of your business. To ensure property qualifies, reference publication 946. The 179 deduction figure is increased for an enterprise zone, renewal community, and the Liberty Zone.

Further Detail

For further detail, contact your tax advisor or visit http://www.irs.gov and reference Form 4562.