Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the U.S. Government to encourage businesses to buy equipment and invest in themselves.
Write off up to $500,000 in equipment purchased during 2011. You can deduct the ENTIRE purchase price from your gross income. What better time to purchase a DrySmart than 2011?
| 2011 Equipment Purchases: | $600,000 |
| First Year Write off: (Under new law, $500,000 is the maximum Section 179 write-off in 2011) |
$500,000 |
| Bonus First Year Depreciation: (On remaining value: $600,000-$500,000=$100,000 x 50% = $50,000) |
$50,000 |
| Normal First Year Depreciation: (20% depreciation in each of 5 years – $50,000 x 20% = $10,000) |
$10,000 |
| Total First Year Deduction: ($500,000 + $50,000 + $10,000 = $560,000) |
$560,000 |
| Tax Savings: (Assume a 35% tax rate. $560,000 x 35% = $196,000) |
$196,000 |
| Actual Equipment Cost: ($600,000 less all tax deductions of $196,000) |
$404,000 |
All businesses that purchase, finance, and/or lease less than $2 million in new or used business equipment during tax year 2011 should qualify for the Section 179 Deduction. If a business is unprofitable in 2011, and has no taxable income to use the deduction, that business can elect to use 100% Bonus Depreciation and carry-forward to a year when the business is profitable.
Always make sure you consult with your tax advisor and check out www.section179.org for more information.
