2006 TAX RELIEF BULLETIN

$108,000 deduction for capital equipment purchases under $430,000 still available

A favorable tax rule regarding expensing and depreciation -- the Expense Election under Section 179 -- is still in effect this year and allows you to deduct $108,000 on purchases of new and used equipment and accessories totaling $430,000 or less. In addition, you can still take advantage of standard depreciation rules, further reducing your tax liability.

How This Could Work for You

The following example illustrates how current tax rules regarding depreciation can benefit those making capital equipment purchases in 2006:

Example:

A company purchases a $400,000 machine from Industrial Plant Equipment. The company purchased no other capital equipment during the tax year, so it may deduct $108,000 under Section 179. The remaining $292,000 is then depreciated under an accelerated method over seven years, generating an estimated additional deduction of $42,000. The sum of these two deductions is then subtracted from the cost of the equipment, resulting in a total first-year deduction of $150,000 or 37.5 percent of the $400,000 investment.

Snapshot View

Cost of Equipment---------------------$400,000.00

Section 179 Expense------------------$108,000.00
Estimated Depreciation on Remainder-$  42,000.00
Total First-year Deduction------------$ 150,000.00

This example presumes that the mid-quarter convention does not apply.
Please note that your annual deduction cannot exceed your aggregate net taxable income for 2006.
The Section 179 Expense Election does not expire at year’s end and is in effect through 2007.