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As a small business, if we purchase 2M of equiptment for our business how much can we expense?

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Robert Ferguson
Most equipment purchased for a business falls under the depreciation rules. However, some of it may qualify for Section 179 write down in the year it is purchased. The limit that could be written down in 2012 was $500,000 plus a depreciable amount of $71,450. However, the $500,000 is only allowable if the total sales exceed all of expenses and the $500,000 amount. Otherwise, it is carried forward.

A better way is to use the lease purchase option of the machinery and write off the lease costs for each year. The Section 179 write off can only be used in the year the machinery is purchased where as the lease purchase allows for write down of the full amount of the lease payments each year.

At the end of the lease you have the right to purchase the equipment or not. If you do purchase the machinery then you can use the Section 179 write down at that time. If you choose not to, you still have had the tax advantage of the lease write off during the term of the lease.
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