The Appreciation of Depreciation…and More!

It continues to be a great time to consider upgrading your older metalworking equipment with new servo press feeds and coil handling equipment. There are several reasons why:

1. Technology advancements from Coe and Sesco will help you raise productivity, quality and profitability levels.
2. Continued lower interest rates…but for how long?
3. And the Internal Revenue Service’s Code Section 179 Tax Relief Bill: The 50% expensing allowance may be over and gone, but Section 179 for small business expensing provision was extended through 2007.

According to Pam Patten at the Association for Manufacturing Technology (AMT), “Section 179 tax treatment allows expensing (deducting in the first year) of the first $100,000 of equipment purchases, if total equipment purchases of all kinds (e.g. machinery, computers, office furniture, trucks, etc.) do not exceed $400,000 in the tax year. Then depreciate the remaining balance using the normal depreciation schedule. Section 179 does not differentiate between new and used equipment. It phases out on a dollar for dollar basis up to an absolute limit of $500,000. So if the total equipment purchases for the year are $401,000 the first $99,000 can be expensed.” (So pay close attention to these schedules.)

This tax relief bill redefines small businesses with an increase to $400,000 of capital purchases rather than the previous definition set at $200,000. Another benefit of the bill is net operation loss carryback, which extends the five-year net operation loss carryback for three years (2003 through 2005) and hold taxpayers harmless for alternative minimum tax.

With the economy continuing on an upswing, don’t miss out on these advantages to invest in 2005! Your competition won’t miss the chance!

For more information on Section 179 click here:

http://www.bankrate.com/brm/itax/Edit/tips/Stories/sec179_deduction.asp

http://www.irs.gov/publications/p946/index.html

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