"Jobs and Growth Tax Relief Reconciliation Act of 2003"

The provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003 have been extended through the tax year ending 12/31/2005.  

On May 28^th, 2003, President Bush signed into law the "Act", which reduced taxes and provided incentives for business investment. Of particular importance to our customers are the following provisions:

Expensing Depreciable Business Assets - IRS Section 179

The primary benefit of making an equipment purchase before the end of 2003 is the tax deduction that a business will receive from what's known as first-year expensing. Under Section 179 of the Internal Revenue Code, you can now deduct up to $100,000 of the cost of the equipment during the year that it is purchased, (but not necessarily paid for) and placed in service after May 5, 2003 and on or before December 31, 2003.

• A business customer is free to pick any equipment that the company needs, including computer software, from the vendor of its choice.

• The Act quadruples the prior 2003 Section 179 expensing write off from $25,000 to $100,000.

• The balance of the equipment cost, if any, has to be "capitalized" and "depreciated".

Business owners can now claim a 50% special bonus depreciation allowance for new property that is acquired after May 5, 2003 and before December 31, 2004. They must reduce the depreciable basis by any Section 179 deduction. The Act raises bonus depreciation from 30% to 50%

Example: On December 29, 2003 you place in service a $150,000 computer system. You can deduct $100,000 of the total cost. The depreciable basis is now $50,000. The Special Depreciation Bonus Allowance of 50%, $25,000, is deducted. The depreciable basis for 2002 is $25,000. Depending on the MACRS classification, 5 years for computers, you can deduct $5,000 as the regular 2003 depreciation.

The combined Section 168K and Section 179 tax deductions total $130,000 of the original $150,000 cost. Assuming a 30% income tax bracket, the tax saving would be $39,000.

The Leasing Company pays for the equipment. The monthly lease payment on a $150,000 computer system would be around $3,000 per month for 60 months with the first month in advance, the net cash saving would be $36,000.

Customers should consult their tax advisor for guidance regarding restrictions or limitations or contact the IRS at www.irs.gov.