If you’re self-employed or run a small business (including a sideline business), last-minute equipment purchases probably will be deductible. Section 179 of the tax code permits deductions for up to $24,000 worth of equipment in 2002, as long as your total equipment outlays don’t exceed $200,000. (Without the Section 179 tax break, equipment purchases have to be depreciated over several years.)
To get the Section 179 deduction for 2002, such equipment must be placed in service by year-end. You can make the purchase payment in 2003 and still take a writeoff for this year.
Note that a 2002 tax law permits 30 percent bonus depreciation, if you can’t use expensing. Suppose, for example, you spent $40,000 on equipment to get a sideline business up and running in 2002. The first $24,000 can be deducted, and the other $16,000 must be depreciated. However, the new law gives you a bonus $4,800 deduction (30 percent of $16,000) while the remaining $11,200 is depreciated over a multi-year schedule.
