In the normal course of events, your company can benefit from the “half-year convention” under the Modified Accelerated Cost Recovery System (MACRS) for property placed in service by Dec. 31. The property is treated as being placed in service on July 1, so you benefit from a half-year’s worth of depreciation on this year’s return.
Caution: If the cost of business assets (other than real estate) placed in service in the last quarter of the year—Oct. 1 through Dec. 31—exceeds 40% of the total cost of assets placed in service during the year, the half-year convention doesn’t apply. Instead, deductions must be computed under a “midquarter convention,” which generally results in smaller first-year deductions.
Strategy: Rely onto bail you out. If you elect to cover the assets under the , they don’t count toward the last-quarter calculation.
The maximum Section 179 deduction for 2008 is $250,000 (up from $125,000 for 2007). But the deduction phases out for purchases costing more than $800,000.
Tip: Alternatively, keep last-quarter purchases below the 40% threshold to avoid any complications.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/6941/year-end-08-tax-strategy-sidestep-depreciation-tax-trap "