2008 Section 179 Benefits*
2008 Section 179 Benefits Could Save You Thousands!*
Increase in Tax Code 179 Deduction
Under IRS Section 179, equipment purchases can be expensed* (deducted from taxable income), if installed after December 31, 2007 and before January 1, 2009. Utilizing Tax Code 179, the amount of investment that may be immediately deducted by businesses is increased to $250,000. This $250,000 deduction takes effect for the taxable year or 2008. Tax payers may purchase up to $800,000 of qualifying equipment each tax year before the write-off is reduced dollar for dollar. Property included in the 179 deduction:*
- Tangible property depreciated under MACRS with a recovery period of 20 years or less,
- Computer software (depreciated under Section 167(f)(1)),
- Qualified leasehold improvement property (defined in Section 168(k)(3))
The equipment should be acquired by purchase for use in active conduct of a trade or business and placed in service.
Under $250,000 Example
| 2008 Equipment Investment | $200,000 | |
| Section 179 Deduction | $200,000 | Entire amount qualifies |
| First Year Deduction | $0 | No remaining deduction |
| Total Deduction | $200,000 | Full amount qualifies |
| Tax Savings (Assuming 35% Tax Rate) | $70,000 | ($200,000 * .35) |
| Actual Equipment Cost | $130,000 | ($200,000 - $70,000) |
Over $250,000 Example
| 2008 Equipment Investment | $450,000 | |
| Section 179 Deduction | $250,000 | Maximum allowed |
| 50% Bonus Depcreciation | $100,000 | ($450,000 - $250000) * .5 |
| First Year Depreciation** | $20,000 | ($450,000 - $250,000 - $100,000) * 0.2 |
| Total Deduction | $370,000 | ($250,000 + $100,000 + $20,000) |
| Tax Savings (Assuming 35% Tax Rate) | $129,500 | ($370,000 * .35) |
| Actual Equipment Cost | $320,500 | ($450,000 - $129,500) |
* The information presented here is for illustration purposes only, and is not intended to offer any tax advice. Consult a qualified tax advisor regarding the tax implications of any purchase or financing transaction.
** This example assumes a five-year depreciation schedule.