Section 179 4th Qtr Tax Saving Strategy for Small Business

By Sean S Marten

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Sean Marten - Senior Credit Analyst, Crest Capital - 10/25/2007

Use the power of available deductions to boost your business’s bottom line in 2007. Purchase new or “new to you” used business equipment now. Then place it in service by December 31st to realize exceptional tax savings.

IRC Section 179 - What is it?
Under the provision of Internal Revenue Code Section 179, a business that spends less than $500,000 this year on qualified tangible property in 2007 may deduct the total cost of those assets, up to $125,000. Input the cost of the equipment that you’re considering in the instant Section 179 Allowance Calculator to find out the potential cash savings.

Designed as an incentive for economic growth for small to medium sized businesses, Section 179 allows you to expense the purchase price of your qualified equipment immediately upon putting it into service. So, you see significant tax savings now, rather than depreciating your newly acquired assets over five or more years.

What Tangible Property Qualifies?
Most new business equipment will fall under the rule of Section 179. Qualified equipment is defined in IRS Publication 946 and includes such common and movable tangible property as all kinds of machinery and equipment, as well as office furniture, computers, printers, software and most vehicles. Used equipment purchased from another party – but not from a company that is also owned by you – can also qualify.

What if I spend more than $500,000?
If your business spends more than $500,000 on business equipment this year, you can still leverage a tax savings. Each dollar over $500,000 you spend, however, reduces the maximum Section 179 deduction by a dollar. For example, if you spend $550,000, your maximum deduction for 2007 would be reduced by $50,000. This still allows you to deduct up to $75,000 of the cost of your new equipment in the first year.

Note: The allowable deduction amount cannot reduce taxable income below zero. The remaining value of your business equipment can still be depreciated over the prescribed recovery period.

What’s the next step toward tax savings?
Action now will ensure the benefits of this tax opportunity to your 2007 business position. Purchase and place into service needed equipment before December 31st to maximize your deductibles.
IRC Section 179 deductions can pave the path to significant tax savings in 2007.

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About The Author
Sean Marten, Senior Credit Analyst at a leading equipment financing company, graduated from DePaul University and has many years of experience in commercial equipment finance. Articles written by Mr. Marten about business and equipment financing can be found at: www.crestcapital.com/equipment_loan_media.