TAX CODE 179 -- Made Simple

TAX CODE 179  -- Made Simple

Practices may immediately depreciate (expense) up to $250,000 on their 2008 Tax Return.

- Most practices try to minimize tax liability. Tax Code 179 helps you do so.

  • Practices can expense the full cost (up to $250,000) of their equipment/software purchase by 12/31/08.

  • So if you buy $75,000 worth of equipment/software, you can expense the full $75,000 to reduce your taxable income.

  • Let’s say taxable income was $100,000 prior to using Tax Code 179.

  • Now with the $75,000 expense, the taxable income is only $25,000

  • Any amount purchased over the $250,000 limit can typically be depreciated over the next 5 years

You can get the full Tax Code 179 savings in 2008, and not start paying for the equipment/software until 2009

  • Finance company will pay any down payments/deposits to GroupOne to get the equipment ordered and get on the training & implementation schedules.
  • We have your system ordered and potentially up and running in 2008 which should satisfy Tax Code 179 criteria.
  •  You use Financing Company’s  No Payments for 6 or 9 Month Plan.
  • You get the Tax Code 179 benefit in 2008 and start making payments in 2009

Tax Code 179 reduces the effective cost of your equipment or software solution

  • Your equipment/software proposal is $75, 0000

  • Your assumed tax rate is 35%

  •  $75,000 in Tax Code 179 write offs equates to $75,000 * 35% = $26,250 in 2008 income tax savings.

  • You just saved $26,250 in actual income taxes through Tax Code 179

  • Therefore, your $75,000 proposal cost, just effectively became a net project cost of $48,750 ($75,000-$26,250= $48,750 or a 35% savings)

Use It or Lose It

  • Tax Code 179 is available to practices every year; however, it does not rollover.

  • After 9/11, Congress temporarily inflated the Tax Code 179 cap from $25,000 with the hope of “jump starting” the economy. This inflated amount has been approved for 2008 with no guarantee of how long it will remain at this level.

DISCLAIMER: This information is not tax advice. You should consult your tax adviser to determine what impact, if any, this information may have on your tax situation for the current tax year or in future years.

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