The IRS has a holiday gift for you. Really, they do!!
- Author Sean Marten
- Published December 31, 2007
- Word count 511
How would you like a new computer for your business this holiday season?
Even better, how about ten computers, a few printers, and some iPhones? Or maybe an SUV - how would that Hummer look under your tree (awkward comes to mind, but it's doubtful anyone would complain.)
The preceding will happen for millions of businesses this holiday season, with the IRS playing Santa Claus. All because of a provision to the US tax code called Section 179.
What is Section 179, and how does it work?
In simple terms, Section 179 is an attempt by the United States government to stimulate the economy by encouraging small to medium sized businesses to purchase equipment this year by making it very advantageous in a tax sense.
In a nutshell, it works like this:
Normally, when a business purchases equipment, they do not get to "write it off" right away. They instead must "depreciate" it over the course of several years. So a business could not realize the full tax advantages until years after the fact.
Section 179 does away with this, and allows certain pieces of equipment (including most electronics and office machines, and even some vehicles) to be deducted in full the year they are purchased. This is an enormous differential, and indeed spurs many businesses to make year-end purchases (because the equipment must be purchased and put into service by midnight 12/31/2007.)
Consider this:
Under the old provision of depreciation: A business purchases a $5,000 computer system, and yields a taxable income savings of $1,000 a year over five years. Yes, that's nice, but it's hardly going to make a business run out and buy a system right now. A business would simply buy the computer system when they needed to upgrade, and not a minute sooner.
Under section 179: That same business would realize the full $5,000 deduction this year. This can have a profound effect on the taxes this business pays. That might make the business buy the system right now.
Why right now? Because tax codes change, so the smart business will take advantage of Section 179 while it's viable and actually look to buy qualified equipment this year. And since many pieces of needed equipment qualify (even many SUV's qualify), it makes it very easy to justify a year-end purchase (statements like "we were going to need new computers anyway - so we may as well save some tax dollars" are often heard around the office supply store.)
Just like Santa doesn't bring gifts to bad children (so the rumor says); there are some limits to what a business can deduct. While the list of qualified equipment is extensive, you still may want to make sure what you are buying qualifies. There is also a limit to how much money can be spent. $500,000 is the limit that a business can spend on qualified equipment to fully qualify for the deduction, and the total deduction cannot be more than $125,000. But most small businesses will not reach these numbers, so Section 179 is truly a "small to medium sized business" deduction, and aimed squarely at helping these businesses grow.
Want the details about this important tax strategy? Go to http://www.crestcapital.com/tax_deduction_calculator for information to maximize your equipment investment. Learn about options that can remove financial roadblocks to your 2007 tax savings.
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- The Advantages of Incorporation for Realtors: Safeguarding Your Financial Future
- 10 essential tax-saving strategies for landlords: Maximise your rental income
- A Comprehensive Guide to Navigating the Process and the Role of Customs Brokers in the UK
- Outsourced Accounting Services for UK Businesses: A Cost-Effective Solution for Financial Management
- Top 8 Self Assessment tax return software
- How to Close a Limited Company in the UK
- Maximizing Your Finances: Unleashing the Power of CPA Services
- VAT penalties – New rules
- TAX-FREE STRATEGIES IN AN UNCERTAIN ECONOMY
- 2022 Energy crisis and failure to connect Reality.
- When Are Corporate and Personal Taxes Due in Canada in 2021?
- You Would Never Have Thought That Having Accounting Internship Could Be So Beneficial
- ACTIVATION OF UAN
- Focal motivations behind getting a Tax direct for Small Business Firms
- Avoiding the flood — tax issues with water rights in agribusiness
- Social security benefits for a family (COVID-19)
- How to use QuickBooks Component Repair Tool?
- Do you want to reduce your taxes for next year?
- Will you be responsible with your tax refund?
- Getting started with QuickBooks Enhanced Payroll in Brief
- Are DSTs Right For Your 1031 Exchange
- Tax Return Makeovers By Kenya Woodard
- Why have all crypto tax attempts failed?
- Are You a Corporation? Know Why Consulting a Tax Accountant Is Vital
- Share capital or share premium for your Dutch company?
- Everything investors should know about 1031 sponsors
- Why is the income tax so high in UK?
- Should I do my own tax return?
- Get More Money Back on Your Tax Return with help from the Tax Cuts and Jobs Act
- Don’t Fall Victim to these 3 Tax Scams in 2018