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Move quickly to collect big depreciation write-offs

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in Small Business Tax,Small Business Tax Deduction Strategies

The enhanced Sec. 179 deduction is a tax bonanza for small business owners. You can write off up to $250,000 of new business assets placed in service in tax years beginning in 2009.

But remember:
The Sec. 179 deduction is limited to the amount of annual taxable income from the business (calculated before the deduction). If 2009 has been a down year—like it has for many small business owners—your allowable Sec. 179 deduction may be miniscule or nonexistent. That generally means you must write off costs under the regular depreciation rules.

Strategy: Buy new assets soon and place them in service before Oct. 1 (assuming your business uses a calendar tax year). Otherwise, you can fall into a tax trap that will result in a reduced depreciation deduction.

If you beat the Oct. 1 deadline, you can benefit from the equivalent of a half-year’s worth of depreciation—regardless of the amount of your taxable income.

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