This is due to The Economic Stimulus Act of 2008, which has significantly increased your purchasing power when it comes to buying new equipment under Tax Code Section 179.
On February 7, 2008 both the Senate and House of Representatives passed H.R. 5140, the Economic Stimulus Act of 2008 (the Act). The Act contains provisions pertaining to tax rebates and depreciation.
When acquiring new equipment, including Alco-Buddy machinery, and other tangible goods, you would obviously prefer to deduct the entire cost this tax year, rather than a little at a time over a number of years. Section 179 essentially allows just that – you can deduct, from your taxable income, the full amount of equipment purchases up to the approved limit for a given year (almost doubled to $250,000 for 2008). Of course, this assumes the equipment is installed during the calendar year.
In addition, depending on the equipment and specific scenario of the business, any excess equipment cost above the amount expensed under Section 179 can be depreciated. And again, 2008 has brought substantial changes – you can now depreciate a full 50% for the first year.
Section 179 is a small business incentive for capital spending, which accelerates the economy and has a profound impact on our business (vending).
FAQ: Are there any tax advantages to this investment?
Yes. The entire investment may be written off. IRS Section 179 allows a write off (up to $250,000 in 2008) for new equipment (for the tax year in which the equipment is put in service) purchased for business purposes.
Tax Code Section 179 is an expense deduction provided for taxpayers who elect to treat the cost of qualifying property (Section 179 property) as an expense rather than a capital expenditure. The election, which is made on Form 4562, is for the tax year the property was placed in service. Under Section 179, equipment purchases, up to the amount approved for a given year, can be deducted from taxable income – if installed by December 31st. For further detail, contact your tax advisor or visit www.irs.gov and reference Form 4562.