Thinking about a machine tool purchase in 2008? There are some new tax incentives you'll want to check out.
Non-bank lenders who specialize in the industry for both leasing and acquisition traditionally have supplied financing to the machine tool industry. Increasingly, and to a greater extent than machine tool builders, distributors are adding financing capability, again through programs or alliances with lenders. Machine tool builders who offer their own financing in partnership with other lenders are another source of financing.
The net result is that there are more sources of financing for machine tool business today than at any time in recent memory.
Whatever your choice, here's the scoop on the Economic Stimulus Plan changes:
The recently enacted bipartisan Economic Stimulus Plan contains increased Section 179 expensing for 2008 business equipment purchases, as well as a one-year 50 percent bonus depreciation allowance for new machine tools and other equipment ordered and placed in service during 2008. Section 179 contains a cap of $800,000 that a business may spend on capital expenditures in order to take full advantage of the incentive. Each dollar of expenditures over that amount means one dollar will be deducted from the write-off.
* The boost in Section 179 expensing increases the amount that businesses can write off for new and used equipment purchases in 2008 from the current $128,000 to $250,000. Moreover, the cap on how much equipment can be purchased to enjoy the write-off has been increased from the current $510,000 to $800,000.
* The one-year 50 percent bonus depreciation means you can write off in 2008 an extra 50 percent of the cost of your new equipment that you buy and start using in 2008.
Here's how the new provisions work: Let's assume that the Peekless KeyHole Co. is in a seven-year asset depreciation class. The company orders and puts into service a new machine tool costing $100,000. Under the new 50 percent bonus depreciation, Peekless can write off 57 percent of the asset in the first year, as opposed to only 14 percent had bonus depreciation not been enacted for the 2008 tax year.
50 percent bonus depreciation
OLD LAW (pre-2008 change)--$100,000 crew machine
1st year total depreciation = 14 percent = $14,000
NEW LAW--$100,000 new...