Investing money in an important piece of equipment is often a difficult decision. When is the best time to buy?
Well, thanks to the Small Business Jobs and Credit Act of 2010 signed by President Obama in September 2010 and the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 signed in December 2010, this might just be your year!! The government is offering companies tax breaks on equipment purchases which give you the option of writing off all equipment spending in 2011. Here are some details on the laws.
The Small Business Jobs and Credit Act, Section 179 was changed to raise the Section 179 deduction from $250,000 to $500,000 for both 2010 and 2011. It also allows a 50 percent bonus depreciation for the 2010 tax year. Normally, you are required to use the normal depreciation schedule and spread out the expense over a number of years.
Looking at the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the government added a 100 percent bonus depreciation with no limits for new assets purchased and installed for use between Sept. 8, 2010, and Dec. 31, 2011. That means you can write off the full cost of new equipment spending during the period, with no cap.
So, is this the right move for you? You should consult your accountant on whether it is better for you to take advantage of the Section 179 deduction or the bonus depreciation. For some, it may be better to follow the usual depreciation schedule versus taking the entire write-off upfront. This is especially true if business is slower and you are not generating huge profits. Doing so would let you spread the deductions over future, more profitable years.