Immediately Deducting The Cost of Equipment

Under current tax law, small businesses can deduct up to $24,000
spentthis year to purchase equipment rather than depreciating the cost
over several years. The amount was scheduled to remain the same in
2002 and increase to $25,000 in 2003.

However, on October 24, 2001, the U.S. House passed a bill that
temporarily increases the deduction to $35,000 for both 2002 and
2003. This is a significant change and bears close scrutiny by the tax
savvy as action moves to the Senate.

This special writeoff method (IRS calls it "Section 179" or "first
year expensing" ) is intended to give smaller businesses a simple and
fast way to deduct the cost of business equipment. It's an incentive
to purchase now rather than later because of the favorable
immediate tax consequences.

There are several restrictions, however.

The deduction is generally limited to the amount of taxable income
you have from your business. However, there is an exception if you
have income from another job. IRS allows an employee with a sideline
business to count the salary he/she earns from the regular job as
business income when figuring the limit on the expensing deduction
for the business.

For personal computers and cellular phones to qualify for expensing,
they must be used more than fifty percent for business purposes.
Special limits also apply to cars.

The bottom line is that this tax technique, when properly used, can
result in significant tax savings for the small business owner.


As always, PLEASE make sure you read and understand the fine print.
It wouldn't be taxes in America otherwise!

You can find help at my website:
http://all-about-taxes.com

Or just send me an email.
mailto:Charlie@...

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http://groups.yahoo.com/group/taxtip


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