Tax Tip of the Week
For the week of December 13, 2004

Business Alert: The depreciation rules are changing

If you own a business, you need to be aware of the recent changes that have been made to the rules for depreciating business equipment purchases.

• First, the 50% bonus depreciation available for the purchase of new business equipment ends this year. You should consider accelerating planned purchases into 2004 to take advantage of this tax break before it’s gone.
   
• Second, the $100,000 first-year expensing election was scheduled to revert to $25,000 in 2006. Tax legislation signed on October 22, 2004, extended the larger write-off through 2007. The $100,000 figure is adjusted annually for inflation. The limit for 2004 is $102,000, and the 2005 limit is $105,000.
   
• Third, the first-year expensing limit that applies to sport utility vehicles purchased for business use is now set at $25,000.
   
• Finally, the former 39-year depreciation period that applied to qualifying leasehold improvements made to commercial property was changed to 15 years for property placed in service from October 22, 2004, through 2005. This 15-year depreciation is also available for qualifying restaurant property.

As you do your 2004 year-end planning for your business equipment needs, take these changes to the depreciation rules into account. You’ll want to analyze whether your equipment and other business property purchases should be completed before December 31 or delayed until next year. For assistance in choosing the best tax strategy for your situation, give us a call.
  

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