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What a Relief!

Thanks to a recently enacted tax law, you may be able to deduct 100 percent of your equipment costs.

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This story appears in the August 2003 issue of Entrepreneur. Subscribe »

Entrepreneurs will enjoy some savory business tax savings as a result of the recently enacted Jobs and Growth Tax Relief Reconciliation Act of 2003. "The most lucrative piece of the new law [for entrepreneurs] is a huge increase in the Section 179 first-year depreciation allowance for qualifying property," says Mallory Collier, tax manager for accounting firm Jackson, Rolfes, Spurgeon & Co. in Cincinnati. Under this tax break, entrepreneurs can immediately deduct 100 percent of the cost of most new and used business equipment instead of depreciating it over several years.

Under prior law, the allowance was limited to $25,000. Now the annual Section 179 allowance for taxable years beginning in 2003, 2004 and 2005 quadruples to $100,000. Keep in mind that the Section 179 allowance is phased out on a dollar-for-dollar basis when qualifying assets costing over $400,000 are placed in service. For example, if a company adds $430,000 of equipment during 2003, its Section 179 allowance is cut back to $70,000 ($100,000 minus $30,000 excess).

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