Tax Benefits of Financing

Discover the new tax savings under the Economic Stimulus Act of 2008!

Business Equipment Purchases

Business owners who buy capital equipment - machinery, computers, and other tangible goods, usually prefer to deduct the cost in a single tax year, rather than a small amount over a number of years. Federal tax law lets small businesses accelerate depreciation under tax code Section 179 for qualified property.

Economic Stimulus Act of 2008

Under Section 179, businesses that spend less than $800,000 a year on equipment or property can write off up to $250,000 in 2008. The rules are designed for small companies, so the $250,000 deduction begins to phase out when businesses purchase more than $800,000 in one year. In addition, a special first-year 50% bonus depreciation is allowed on new property acquired and placed in service in 2008. The 50% special depreciation is in addition to regular 20% depreciation and Section 179 deduction. Companies cannot write off more than their taxable income. For any changes to the tax code, please visit www.irs.gov or contact the IRS helpline at: 800-829-4933.

Benefits of Non-Tax Leases

Non-Tax/Capital Lease. The benefit of this lease type is the ability to take advantage of IRC Section 179 and expense up to the amount allowed for the year that the equipment is installed. You may depreciate any excess on the depreciation schedule for that particular asset. Examples of this type of lease include $1.00 Buyout, 10% Purchase Upon Termination (PUT), and Security Deposit equals Buyout (SD=BO) leases.

Example: Equipment is financed and put in use in 2008 and the cost is $275,000. Using Section 179 and assuming a 35% tax bracket, net savings on the equipment would be: