Tuesday, September 7, 2010

Business Tax Incentives

I understand that President Obama will put forth several tax incentives for businesses. The first of these incentives is said to be a 100% write-off of capital expenditures. What this means in basic terms is that any business assets purchased would be eligible for immediate write-off in the year they are purchased, instead of over time as required by current depreciation requirements. For example, if your business purchases a new machine for operations which costs $250,000, the full-cost of the machine would be deducted against current year income. For client's who are S-Corporations or LLC's this basically results in costs savings equal to your tax rate. So, in the example of the $250,000 machine, if we assume you fall into the 30% tax bracket, then the effective costs savings would be ($250,000 x .30 = $75,000). You would basically be paying a net $175,000 for a machine which actually costs $250,000, that's a real savings.

We will see where this proposals goes. I will keep everyone aware of the other business incentives which are supposed to be released later in the week.

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