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Tax Solutions
Explained |
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New Section 179 Tax Deduction Limits |
Tax Deduction Example |
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Non-Tax Leases Non-tax leases allow lessees to claim depreciation deductions on their tax return. Examples of this type of lease include: |
Example: Equipment is financed and put into use in 2006 and the cost is $125,000. Using Section 179 and assuming a 35% tax bracket, net savings on the equipment would be: |
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$1.00 Buyout 10% Purchase Upon Termination (PUT) Security Deposit equals Buyout (SD=BO) Personal Business Loan
IRC Section 179 Tax Deduction Small business owners who buy capital equipment may deduct the cost in a single tax year, rather than over many years.
IRC Section 179 allows businesses that spend less than $430,000 a year on equipment or property to write off up to $108,000 in 2006* Lessees may depreciate any excess on the depreciation schedule for that particular asset.
Companies are not allowed to write off more than their taxable income.
*Consult your CPA or tax advisor for the specific impact to your business.
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Equipment cost: $125,000
1st Year Write Off: $108,000 ($108,000 is maximum write-off)
Normal 1st Year Depreciation $3,400.00 ($125,000-$108,000=$17,000 X 20% =$3,400)* *Depreciation calculated at 5 years
Total 1st Year Deduction $111,4000 ($108,000 + $3,400 = $111,400)
Tax Savings Assuming Rate of 35% $38,990 ($111,400 x .35 = $38,990) (real dollars back into your business)
1st Year Bottom Line Equipment Cost $86,010
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