Tax Bulletin

JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003

Save on Equipment Purchases!

Receive an immediate tax break
50% depreciation allowance on major purchases
Good on purchases made from 5/5/03 to 12/31/04
Applies to equipment and vehicles

How You Can Save On Equipment Purchases
If you purchased qualifying equipment after May 5, 2003, you may be due an immediate 50% tax break. Tax relief is available on machinery investments through December 31, 2004.

50% First-year Depreciation Allowance
The Jobs and Growth Tax Relief Reconcili-ation Act of 2003 stated that if you acquired qualifying depreciable property after May 5, 2003 with a recovery period of 20 years or less, you may be able to claim an additional 50% first-year depreciation allowance. The Act was signed into law on May 28, 2003.

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Qualifying Investments
This "bonus depreciation" applies to most types of business property (except real estate):

Industrial machinery
Construction equipment
Computer software and hardware
Telephone equipment
Office furniture
Qualified business vehicles*
Leasehold improvements

* The new law temporarily boosts the recovery period.

How The Provision Works
Example #1:
A customer purchased a $100,000 compactor with a five-year depreciation rate.

First Year Deduction:
$50,000	(50% bonus under new law)
$10,000	(1/5 of the remaining 50% assuming straight line)
$60,000	Total First Year Deduction

Example #2:
On June 1, 2003, a contractor acquires and places into service qualified construction or industrial equipment that costs $1 million. The taxpayer is allowed an additional first-year depreciation deduction of $500,000. The remaining $500,000 of adjusted basis is recovered in 2003 and subsequent years pursuant to the depreciation rules of present law.

More Information
The changes in the rules are so new that little information has been published by the IRS. Literature about the Jobs and Growth Tax Relief Reconciliation Act of 2003 will be available soon and will highlight provisions of the Act. When it is released, business owners may download the information from the IRS Web site at www.irs.gov or a tax advisor.

Information will also be available soon at local IRS offices or by calling 1-800-TAX-FORM (1-800-829-3676).

Click here for a PDF with more information about saving on equipment purchases. (PDF: 2 pages / 492k)

Always see your own CPA or tax attorney to see how this may apply to your situation.

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