Capital assets are required for nearly all businesses to operate effectively. Opportunistic business owners can benefit greatly from alternative purchasing options and government tax incentives when leasing new business equipment. Fortunately for small business owners seeking capital assets, Congress expanded Section 179 of the Small Business Jobs Act of 2010 in February of 2011.
Under the current provision, business owners can deduct the full purchase price, the limit of which has been increased to $500,000, from taxable profit in a single year. While previously, the limit on equipment purchases was set at $800,000, the 2011 limit on equipment purchases has been set at $2 million. Additionally, small business owners purchasing capital assets that total more than $500,000 can also deduct "Bonus" Depreciation on the remaining value.
Before these tax incentives were established, business owners could only depreciate the equipment year over year or expense a small portion of the equipment cost. However, this option encourages small business owners to invest in their own businesses, and at the same time, encourage general economic growth.
Section179.org highlights capital leasing options as cost effective, and in some cases, profitable methods of obtaining capital assets. According to this resource, businesses who lease qualifying capital assets can deduct the full value of the equipment without paying the full cost of the equipment in a single year. The resulting tax savings can actually exceed the required payments, which means businesses can actually make money during the first year of the lease.
To determine if capital leasing is the right option for your business, you can use a tax savings lease calculator which will show you the true cost of ownership of your capital assets.
For a full description of Section 179 tax incentives and provision requirements, visit IRS.gov.