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Need new equipment? Finance Section 179 assets to the hilt

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in Hiring,Human Resources,Small Business Tax,Small Business Tax Deduction Strategies

The new Hiring Incentives to Restore Employment (HIRE) Act preserves the enhanced Section 179 deduction of $250,000 for assets placed in service in tax years beginning in 2010. Without the tax law change, the maximum deduction was scheduled to fall to $134,000.

Strategy: Load up on new business equipment this year. It may be your last shot at a $250,000 instant write-off for the near future.

You might even borrow money to buy the equipment if you don't have the cash on hand. The tax law allows you to write off the full amount of the cost -- up to the stated annual limit -- even if you finance the purchase.

Example: Your company needs $200,000 of new equipment, but can afford to ante up only $50,000. So it borrows the remaining $150,000 for the purchase. In general, you can still deduct the entire $200,000 under Section 179 even though the financed portion is three times your cash outlay. 

Just make sure you have all your ducks in a row. There are two main limits:

  1. The Section 179 deduction can't exceed your taxable income from the business.
  2. The Section 179 deduction phases out on a dollar-for-dollar basis for purchases above an annual threshold. For 2010, the threshold is $800,000 (increased from $530,000 by the HIRE Act).

Tip: Finance charges paid on the loan are also deductible as business interest. 

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