2009 TAX INCENTIVES
for Equipment Purchases

$250,000 deduction for NEW OR USED capital equipment for purchases under $800,000
for tax years beginning in 2008 and extended through 2009

A favorable tax rule regarding expensing and depreciation -- the Expense Election under Code Section 179 -- is still in effect this year and allows you to deduct $250,000 on purchases of new and used equipment and accessories totaling $800,000 or less. You may be able to take an additional first year special depreciation allowance for certain qualified property.  The amount reduces to $128,000 in 2010 and the amount of the cap on equipment purchased reduces to $510,000 in 2010.

How This Could Work for You

The following example illustrates how current tax rules regarding depreciation can benefit those making capital equipment purchases in 2009:

Example:

A company purchases a $275,000 machine from Industrial Plant Equipment. The company purchased less than $800,000 of capital equipment during the tax year, so it may deduct $250,000 under Section 179. The remaining $25,000 is then depreciated under the bonus depreciation rules for an additional $12,500.  The balance is then depreciated under the modified accelerated cost recovery system (macrs) over a seven year period (28.57% in year 1), generating an estimated additional deduction of $3,571. The sum of these two deductions results in a total first-year deduction of $266,071 or 96.75 percent of the $275,000 investment.

Snapshot View

This example presumes that the mid-quarter convention does not apply.  
Everyone's tax situation is different and you should always consult with your tax professional.
Please note that your annual deduction cannot exceed your aggregate net taxable income for the year.