New Business Tax Advantages
Available after May 5, 2003
USE TAX SAVINGS TO MAKE YOUR PAYMENTS!
First year's tax savings could exceed first year's equipment payments! Equipment leases that include a $1.00 purchase option (Finance Lease) qualify for the Federal Section 179 and the new 50% bonus depreciation. Companies may also be eligible for additional state and local tax deductions plus interest deductions. Companies purchasing equipment now could see their tax savings cover all of their 2003 payments and still have additional refund monies available.
Section 179 Federal Income Tax Deduction: This deduction allows a company to deduct the first $100,000 of equipment (new or used) purchased in 2003 from their taxable income. For companies purchasing, or leasing with a $1.00 buy-out option, up to $400,000 of equipment in 2003 this deduction is available in full. This deduction phases out between $400,000 and $500,000 and is not available for companies purchasing over $500,000 of equipment in 2003.
EXTRA 50% WRITE-OFF
The Jobs and Growth Tax Relief Reconciliation Act of 2003 gives additional first year depreciation of 50% of the adjusted basis of qualified equipment. Effective for new equipment acquired after May 5, 2003 and before December 31, 2004, the Act allows taxpayers to claim an additional first-year depreciation deduction equal to 50% of the adjusted basis of qualified equipment.
Additionally companies can take their standard depreciations deductions on the adjusted basis of qualified equipment. Machine tools would typically be depreciated over 7 years.
$175,000 of machine tools leased with a $1.00 purchase option:
||Section 179 Deduction
||50% Bonus Depreciation
||Total First Year (equals 81.6%)
Note: Companies should always talk to their accountants to confirm eligibility for tax benefits. Companies may also be eligible for additional state and local tax deductions plus interest deduction depending on time of year. These calculations are estimates only as everyone's tax situation is different.