The Jobs and Growth Tax Relief Reconciliation Act of May 23, 2003 remains in place for 2005. This bill increases the limit for accelerated depreciation allowed under IRS Section 179. This new limit, estimated to be $105,000* for 2005, allows up to $105,000 of equipment cost to be expensed in the year it is acquired. This results in an immediate tax savings for the business.**

Immediate Expensing
One way the Act can help reduce your taxes is that it allows you to immediately deduct as a business expense up to $105,000 of qualifying property. For smaller businesses that do not purchase a lot of equipment or software, you may be able to receive immediate tax benefits instead of slowly deducting the property over 5 or 10 years.

For example, let's say you acquired (acquisition by lease purchase qualifies) $50,000 of equipment. Your immediate expense deduction is $50,000 (compared to the standard MACRS of $15,000) representing an increased first year tax deduction of $35,000. This results in a tax savings of $12,250!! (Assumes a 35% tax brcket)

Bonus Depreciation
The additional "Bonus Depreciation" allowed under IRS Section 168 has returned to its original limits for 2005. The Bonus Depreciation allows for 30% of any equipment cost in excess of the $105,000 Section 179 limit (up to a maximum cost of $410,000*) to be expensed in the year the equipment is acquired. Normal MACRS depreciation is applicable for the remaining 70%.

Check out our Tax Lease Savings Calculator.