P R E S S R E L E A S E
January 01, 2005 : Buy Equipment
and Software This Year!
In May, 2003, President Bush signed
the Jobs & Growth Act into law. The law expands
the depreciation bonus enacted in 2002 and allows buyers
of new equipment to depreciate an extra 50% of the
cost of the equipment for this tax year. The 2003 stimulus
law also increased Section 179 business expensing levels.
What is the depreciation bonus?
A temporary special depreciation allowance enacted by Congress during the recent
economic downturn to encourage business capital investment (ie., to encourage
businesses to buy stuff!). It allows equipment purchasers to depreciate more
of the cost of equipment up front, thereby reducing tax liability. It expires
on December 31, 2005. The clock is ticking!
How does it work? To be eligible,
property must be:
1. Depreciable under MACRS
2. Have a recovery period of 20 years or less
3. Must be acquired and placed in service before January 1, 2005
Here’s the math: First year
of a $150,000 lease:
a. Section 179: $150,000 – 100,000 (plus inflation)= $50,000
b. Bonus depreciation: $50,000 – 25,000 = $25,000
c. Regular depreciation: $25,000 - 5,000 (20% each of 5 years)
Total First Year Write Off: $130,000! ($100,000 + 25,000 + 5,000)
For transactions under $100,000, the write off is dollar for dollar.
Will the depreciation bonus be extended?
Probably not (odds 20:1 against) because the economy is recovering and money
is tight in Washington, DC. The depreciation bonus is a powerful tool.
Why should I place orders now? I still
have four months until the deadline.
Dealer stocks are already tight and we expect an upsurge in demand towards
the end of the year as customers rush to take advantage of the depreciation
rules before they expire.
No Money in
the Budget? LEASE, LEASE, LEASE, LEASE, LEASE!!!! |
