On September 27, 2010, Congress passed The Small Business Jobs and Credit Act of 2010 which expanded the Section 179 benefit:
- Increases the Section 179 deduction to $500,000 (up from $250,000).
This means that if you buy (or lease) a piece of qualifying equipment, you can deduct the up to $500,000 of the purchase price from your gross income.
- Increases the total amount of eligible equipment purchased to $2 million (up from $800,000).
This means you can purchase more equipment and still have the benefit of the Section 179 deduction.
- Extends the “50% bonus depreciation” to tax year 2010 (it was rescinded at the end of 2009, but has been restored.)
For equipment purchases over the Section 179 deduction of $500,000 you can deduct an additional 50% of the overage in addition to your standard depreciation deduction.
- Extends Section 179 Benefits through December 31, 2011.
What does this mean for you?
If you lease a piece of qualifying equipment with Marlin Leasing, you can deduct up to $500,000 of the equipment price without paying the full amount this year.
In fact – the amount you save in taxes could be greater than what you pay in the first year of a lease. Your equipment is making you money from day one!
Example: Equipment Cost of $600,000
|First year write-off: $500,000|
$500,000 is the max. Section 179 write-off
|Total 1st Yr Deduction: $560,000 |
$500,000 + $50,000 + $10,000 = $560,000
|50% Bonus Depreciation: $50,000|
On remaining value:
$600,000 – $500,000 = $100,000
$100,000 x 50% = $50,000
|Tax Savings |
Assuming Rate of 35%: $196,000
$560,000 x 35% = $196,000
|Normal 1st Yr Depreciation: $10,000|
Depreciation calculated at 5 years = 20%
$50,000 x 20% = $10,000
|1st Yr Net Cost |
After Tax Savings: $404,000
$600,000 – $196,000 = $404,000