2010 Tax Information

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The Bonus Depreciation and Section 179
Increases Can Mean Big Savings for 2010 and 2011 Equipment Buyers

On Sept. 27, 2010 President Barack Obama signed the Small Business Jobs Act (SBJA). In addition to providing incentives for small business, the SBJA extended the depreciation on bonus (2010 only) and raised Sec. 179 expensing limits through the end of 2011 to encourage equipment purchasing. The economic stimulus laws can potentially mean big tax savings for you and your company. By lowering your taxable income, the depreciation bonus (for new equipment) and Section 179 (for new and used equipment) can dramatically cut your 2010 and 2011 federal tax bills, thereby freeing up cash in the near term.

Quick Summary: To be eligible for the 2010 depreciation on bonus, the equipment must meet the following requirements:

• The equipment must be depreciable under MACRS and have depreciation on recovery period of 20 years or less.
• The equipment must be new.
• Under Section 179, businesses spending less than $2,000,000 a year on qualified equipment may write off up to $500,000 in 2010 and 2011. The $500,000 deduction phases out when a business purchases more than $2,000,000 in one year.
• The 50% Bonus Depreciation was reinstated through December 31, 2010; however your new equipment must be placed in service by December 31, 2010 to qualify for the 50% Bonus Depreciation.
• Companies cannot write off more than their taxable income

Example:
2010 Equipment Purchase: $650,000
First Year Write Off: $500,000
(Under the new law, $500,000 is the maximum
Section 179 write- off in 2010)

Bonus First Year Depreciation: $ 75,000
(On remaining value: $650K-$500K-$150K
X 50% =$75K

Total First Year Deduction: $590,000

Tax Savings: $206,500
(Assuming 35% tax rate; $590Kx35%-$206,500)

Total Equipment Cost: $443,500
($650K less all tax deductions of $206,500)

Check with your CPA or Tax Accountant today to see how this new bill can help you get the equipment you need for your plant this year…and save money too!