Business owners can find some welcome relief from their annual tax bite when purchasing necessary office equipment. Expensing your deductions is a big incentive to purchase what you need, rather than deducting such equipment as it depreciates each year. You must show earned income to use expensing, and all equipment must be used a minimum of 50 percent of the time solely for business purposes.
Should you decide to not expense certain items, you can still use depreciation deductions, which now allow a higher percentage of the cost of the equipment during the first few years of use. Review deduction tables when making your decision. Other depreciation bonuses may also apply, so it is worthwhile to discuss such items with your accountant or tax preparer. Also, discuss when would be the optimal time of the year to make equipment purchases. You may want to make purchases prior to the end of the year, or wait until the following year, depending on whether you plan on expensing or depreciating. This will also depend on how much equipment you have already purchased during the calendar year.
These relatively new federal government tax incentives were designed to stimulate the economy and promote the growth of new businesses. Local tax incentives are also appearing in many parts of the United States.
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