Section 179 Federal Income Tax Deduction

This deduction allows a company to deduct the first $125,000 of equipment purchased in 2007 from their taxable income. For companies purchasing (or leasing - with a $1.00 buy out lease) up to $410,000 of equipment in 2007 this deduction is available in full. It then phases out between $410,000 and $512,000 and it is not available for companies purchasing over $512,000 of equipment in 2007. However, companies can finance purchases over $410,000 with an operating lease & may still be able to claim this deduction.

USE TAX SAVINGS TO MAKE YOUR PAYMENTS!
First year's tax savings could exceed first year's machine payments! Equipment leases that include a $1.00 purchase option qualify for the federal section 179 deduction 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 their first year's payments!

$125,000 WRITE-OFF (New for 2007)
Section 179 Federal Income Tax Deduction: This deduction allows a company to deduct the first $125,000 of equipment purchased in 2007 from their taxable income. For companies purchasing (or leasing - with a $1.00 buy out lease) up to $410,000 of equipment in 2007 this deduction is available in full. It then phases out between $410,000 and $512,000 and it is not available for companies purchasing over $512,000 of equipment in 2006. However, companies can finance purchases over $410,000 with an operating lease & may still be able to claim this deduction.

STANDARD DEPRECIATION
Additionally companies can take their standard depreciation deductions on the adjusted basis of qualified equipment. Machine tools & fabricating equipment are typically depreciated over 7years.

The total cost of property that may be expensed for any tax year cannot exceed the total amount of taxable income (determined after application of the investment limitation) derived from the active conduct of any trade or business during the tax year.  Costs disallowed under this rule may be carried forward an unlimited number of years subject to the ceiling amount for each year.

The maximum amount of asset cost that can be expensed by year is:  $125,000 for 2007.  For example, if you purchase or lease a piece of equipment for $45,000 and install it in 2007, you are eligible to take a $45,000 tax deduction in the respective year. Contact your tax advisor for specific information regarding IRS Section 179 and all accounting procedures.