New tax write off

[DPKetchum]

Hope I'm not in wrong forum but need help on understanding how new tax write off($24,000)first year for small buisness owner works etc. If its worth looking nto i might have a excuse to sell my truck and jump into a 2003!

 

[E7mack96]

I think you are talking about the Section 179 deduction. It is not new, just the amount of the writeoff is going up every year.



Otherwise, There is an additional writeoff on equipment bought after 9/11 . It is accelerated depreciation in addition to the standard 20% first year depreciation (using MACRS) .



Do you need an extra writeoff??



If you are getting rid of the old unit, and it was written off, or depreciated, you may have a gain to report on form 4797. Depending on your individual situation, you could end up owing more tax on the sale than you save on the new vehicle.



As far as the sec. 179, you would immediately write off up to 24,000 in the year of purchase. You would also depreciate the remaining balance over 5 years. (using MACRS, or straight line).



Say the truck costs 42,000



You write off 24,000 right away.



you have 18,000 left to depreciate over 5 years.



20% is written off this year as well ( $3,600 )



next year you'd get 32% of the $18,000 remainder

(under MACRS) ($ 5,760)



and so on.....





Just be careful on so much writeoff at once. If you get rid of it within the 5 years or sooner, you'll have a hefty capital gain.



Always plan expenses and writeoffs based on projected income and tax liability.



Feel free to PM if you like for information regarding your specific situation



E7