Ah, it’s November.  To a lot of us this means cool weather, leaves changing colors, and (of course) end of the year tax planning!  The great news is that there is still time to maximize your 2008 tax benefits.  Don’t forget about bonus depreciation and the Section 179 Deduction.  Section 179 allows companies to deduct the full cost of eligible business equipment bought in this tax year, as opposed to spreading it out across several tax years. 

This year the Economic Stimulus Act increased the Section 179 deductions for equipment purchased in 2008.  The law increases the amount of qualified capital equipment that businesses can expense to $250,000, up from $125,000 in 2007.  To qualify, the property must be business equipment used in the business at least 50% of the time.  Permanent structures do not qualify, although some single use farm buildings do.  The equipment may be new or used and must be acquired during the 2008 tax year, from an entity not controlled by the purchaser. 

The Section 179 incentive is geared toward small businesses so the deduction phases out when a business purchases more than $800,000 in one year.  For example, with an $800,000 capital equipment purchase the first $250,000 can be 100% expensed and the remaining $550,000 will be depreciated normally.  An exception to this rule is that a company cannot write off more than their taxable income.  

Section 179 is a great benefit when you lease or finance your equipment.  It gives you the ability to write off all, or at least up to $250K, of your equipment purchases this year while only investing as little as the first and last months’ payments.  The write off exceeds the investment you made to get that piece of equipment, resulting in a lower tax bill.