Tax Tip of the Week
For the week of August 16, 2004

Business equipment tax break ends soon

Are you planning to buy new equipment for your business? If so, keep in mind that one of last year’s business tax breaks expires at the end of this year, and another lasts only through 2005.

Bonus depreciation. Under the 2003 Tax Act, you can deduct 50% bonus depreciation in the first year on most new business equipment purchases. But this bonus applies only to equipment you place in service this year, with a few limited exceptions. The bonus depreciation gives you an extra deduction against this year’s taxable income. Most new equipment you buy and some leasehold improvements qualify for the bonus.

Expensing. Your equipment purchasing plans might also benefit from another of last year’s tax breaks. This break allows you to take an upfront tax write-off for up to $102,000 of your 2004 equipment purchases. You can take this amount as an immediate tax deduction rather than as depreciation spread over several years. This expensing allowance, known as a Section 179 expense, begins to phase out if your total annual equipment purchases exceed $410,000. Most new or used tangible personal property qualifies for the tax break.

Be aware of these tax benefits as you draw up your purchasing plans for the remainder of the year. In your planning, be aware that the 50% bonus depreciation ends after this year and the increased expensing election ends after 2005. We can help you maximize the tax advantages of your equipment purchases. Please contact our office if you’d like assistance.

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