Important Tax Information for Small Businesses

How Do the New Tax Laws Benefit Your Business?  Read On!

Many small businesses have been impacted by challenging economic times for the last few years.  Some of our customers have told us they have put their equipment purchases on hold until the economy turns around again.  But there is some relief in the form of tax reform.  We recommend discussing tax issues with your accounting professional, however the basic information is included here.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 is structured to assist small business acquire the equipment needed to grow or replace obsolescent equipment.  Here are some highlights:

• Section 179 Deductions
  The best part of the new law is a huge increase in the Section 179 first year depreciation allowance. The recently signed law quadrupled the allowance—allowing companies to write off up to 100% of the cost of most new and used business assets (other than real estate) in the year it is put into service. Previously, the maximum expense in one year was $25,000. Companies may now write off as much as $100,000 per year in purchases, thus lowering their taxable income by the same amount. And it does not matter whether the company paid cash for the business assets or borrowed to purchase them.  The time period for this deduction is tax years 2003, 2004 and 2005.
  
  

• 50% Bonus Write Off for New Equipment
  The new law also created an accelerated depreciation schedule for some types of property that normally would be written off using standard depreciation tables. For property purchased after May 5, 2003, businesses can choose to claim 50% "bonus" depreciation, which is added on to the normal depreciation write-off for that particular property. For example, if the property normally would be written off over a five year period, the taxpayer could write off 60% of it in the first year - the 50% bonus, plus 20% of the remaining amount.  The time period for this deduction is January 1, 2005.

If you are thinking of expanding your business, increasing efficiency or replacing obsolescent equipment, you should be seriously considering the impact of the new tax reform.  This reform has been put into law to stimulate the economy by helping to subsidize small businesses.  Take advantage now!   

Complete Tax Code Available Here

Home