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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: BWAC who wrote (166384)	11/22/2008 4:15:33 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 306849

if you had 80K of receipts and bought a 70K escalade you now had almost no taxes to pay. None. I know, the purchase price of the car is not free... but its a whompin' deduction, incredible. Section 179 used to be capped at 17K or something. Who really cares if the depreciation gets taken all in one year or spread over the normal course of 5 years? End result is the same. Come on you are kidding right? You make 100K in receipts and buy a 80K escalade. If you have to depreciate it you get a 20Kdeduction for this but still pay tax on 60K that year. If you write it off in year ONE with a section 179 you pay almost no taxes that year! What is the Section 179 Deduction?? Most people think the Section 179 Deduction is some arcane or complicated tax code. It really isn't, as the following will show you. Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment 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 US Government to encourage businesses to buy equipment and invest in themselves. It is sometimes referred to as the "SUV Tax Loophole" or the "Hummer Deduction" because many businesses have used this tax code to purchase qualifying vehicles (like SUV's and Hummers.) Essentially, Section 179 works like this: When your business buys certain pieces of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a vehicle, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example.) Now, while it's true that this is better than no write off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it. In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting. That's the whole purpose behind Section 179. See the following graphic for an example of the savings that are available to you. Limits of Section 179 Section 179 does come with limits - there are caps to the total amount written off ($250,000 in 2008), and limits to the total amount of the equipment purchased ($800,000 in 2008.) The deduction begins to phase out dollar for dollar after 800k, so this makes it a true small and medium-sized business deduction. However, in 2008, businesses that exceed the $250k deduction limit can take a bonus depreciation of 50% on the amount that exceeds the limit. And then also take normal depreciation on the rest. Nice. section179.org