Consider Business Equipment Purchases Before the End of 2009

Businesses considering the purchase of equipment may be able to reduce their income taxes by making the purchase and placing the equipment in service before the end of 2009 rather than waiting until 2010.  Two significant provisions are currently set to expire at the end of 2009:  expanded first-year expensing and bonus depreciation.

The so-called "Section 179 Expensing" limit is $250,000 and will drop to $134,000 for tax years beginning in 2010.  The amount that may be expensed phases out dollar for dollar as the total year's purchases exceeds $800,000; dropping to $530,000 in 2010.  Unlike bonus depreciation, eligible equipment does not need to be brand new.  Furthermore, for fiscal year business whose tax year begins in 2009 and ends in 2010, the expensing provisions will include 2010 purchases made within the fiscal year, whereas for bonus depreciation, the purchase must actually be in 2009.

Bonus depreciation is 50% of the cost of brand new equipment (and certain other property) as first reduced by any Section 179 expensing.  Bonus depreciation expires at the end of 2009.  Regular depreciation applies to the balance of the cost of equipment that was not deducted under the Section 179 and bonus depreciation provisions.