In 2010, new laws were enacted that extend and enhance tax incentives to stimulate growth and employment through 2012. Changes to Section 179 deductions and bonus depreciation make it particularly favorable for most companies to acquire equipment and software needed today.
Sec. 179 Deduction Limit – $139,000 in 2012 on new or used equipment and software.
Sec. 179 Deduction Threshold – $560,000 is the maximum amount that can be spent on equipment before the Section 179 deduction available begins to be reduced.
Bonus Depreciation – 50% (usually taken after the $139k deduction limit is reached). This applies only to new equipment and can be taken when equipment purchases exceed $139,000.
By financing an equipment purchase, businesses may acquire and write off up to $139,000 worth of equipment without spending $139,000 during that first year. That is because the $139,000 purchase is being financed through monthly payments.
Be sure to consult a tax advisor to confirm how to use financing to best take advantage of this very generous incentive.
Contact Tech II now to learn more about your finance options. The time to buy or lease is now!
Here are the highlights:
Example*: Equipment cost of $200,000
Section 179 Deduction in 2012 $139,000
Maximum deduction = $139,000
50% Bonus Depreciation in 2012 $30,500
For the remaining $61,000 of this
purchase, 50% can be depreciated
in the first year
1st Year Depreciation $6,100
Typically 20% for 5 years
Total 1st Year Deduction $175,600
Sum of above deductions
Tax Savings $61,460
Assuming a 35% tax rate
Net Cost $138,540
After 1st Year Tax Savings
* There are other rules associated with the tax laws in this example. Please consult your tax and accounting advisors. The above example cannot be relied on as tax advice or that you are entitled to the deductions or depreciation.