Purchasing Equipment: When Is the Best Time to Buy?

Thinking about making equipment purchases for your business? Now is the time to act.  Through the end of 2011, you are able to take a 100% bonus depreciation deduction for new equipment that is purchased. If the equipment purchased is not new, you can still deduct 100% of the equipment up to a limit of $500,000 under Section 179.

The primary differences between the bonus depreciation and the Section 179 deduction are as follows:

  • Bonus depreciation is for new equipment only
  • There is no limit to the amount of bonus depreciation, whereas Section 179 is limited to $500,000 of equipment purchases
  • Section 179 cannot be used to create a net operating loss

Section 179 and the bonus depreciation do not apply to passenger automobiles, even if the auto is used solely for business. Fortunately, Section 280 provides bonus depreciation for passenger automobiles placed in service in 2011 in the maximum amount of $8,000. This is in addition to the standard depreciation allowed for passenger automobiles of $3,060 in the first year of service for a potential total of $11,060 in the first year depreciation. This does not apply to a SUV over 6,000 pounds. An SUV over 6,000 lbs. is eligible for up to $25,000 in section 179 expense; and, if the vehicle is used 100% for business, the remaining value can be taken as 100% bonus depreciation in 2011.

Beginning in 2012, the bonus depreciation will be reduced to 50% and Section 179 will be limited to $139,000. So now is the time to act to take advantage of these generous deductions.




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