The Section 179 tax relief incentive for small business has been extended into 2008. President Bush recently signed the Iraq budget bill which included an extension of this popular tax policy. Following is a brief description to keep you informed on this issue.
Tax laws for manufacturing companies
For as little as 4% of your equipment cost, you can save thousands of dollars on your taxes.
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 regular 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!
Section 179 Federal Income Tax Deduction: This deduction allows a company to deduct the first $112,000 of equipment (Section 179 Property) purchased in 2007 from their taxable income. For companies purchasing (or leasing - with a $1.00 buy-out lease) up to $450,000 of equipment in 2007, this deduction is available in full. It then phases out on a dollar-for-dollar basis between $450,000 and $562,000 and it is not available for companies purchasing over $562,000 of equipment in 2007. However, companies can finance purchases over $450,000 with an operating lease and may still be able to claim this deduction.
Additionally, companies can take their standard depreciation deductions on the adjusted basis of qualified equipment. Machine tools and fabricating equipment are typically depreciated over 7 years.