Tax Incentive Opens Window on Equipment Purchases and Leases

Edition: June 2002 - Vol 10 Number 06
Article#: 1260
Author: Greg Einhorn

Sales reps have a three-year opportunity to help their customers acquire needed equipment under more favorable terms, due to the federal economic stimulus package signed into law in the wake of the Sept. 11 disaster.


The Job Creation and Worker Assistance Act of 2002 (Public Law No. 107-147) – allows businesses to expense 30 percent of the cost of equipment in the year of purchase. This new provision to the tax law along with the existing Sec. 179 expensing allowance makes a powerful reason to buy equipment now, says Greg Einhorn, director of sales for Group Financial Services (www.finservices.com), a 25-year-old financial services company based in Hilton Head, SC.


“This is a great opportunity for the sales rep to walk in their customers' doors and create a sale,” says Einhorn, whose company acts as the financial services division of National Distribution and Contracting (NDC), Nashville, TN, which includes ABCO Dealers, CIDA Dealers, Starline Dealers and the American Dental Cooperative.


The new tax law allows businesses – including physicians and group practices – to take a 30 percent depreciation bonus during the first year of equipment ownership (or leased) on equipment acquired between Sept. 11, 2001 and Sept. 11, 2004. This means greater opportunity to reduce taxable income and substantially lower the cost of the equipment. “So, a sales rep can show how they can put real additional dollars in their customers' pockets,” says Einhorn.


“Not everyone has the cash on hand for needed equipment purchases,” he continues. “So, financing is the device which makes it affordable. It's a very attractive sales tool available to salespeople to drive product and equipment sales.”


Even though the Act was not signed into law until March 9, 2002, it is retroactive to Sept. 11, 2001. “We're encouraging sales reps to tell their customers that if they made any post-September-11 purchases that might qualify, they should consult their accountant or re-file their taxes,” says Einhorn.


Editor's Note: Readers interested in learning more about the current tax law can receive a free copy of Group Financial Service's sales software companion™, which automates the calculation of final equipment cost after tax benefits, Please contact Greg Einhorn at 1-888-222-6890 or email info@finservices.com.


Tax Benefits of the New Law
Below is a chart demonstrating how the provisions of the Job Creation and Worker Assistance Act of 2002 can result in tax benefits exceeding $6,000 on a $100,000 piece of equipment.





















































































































































 Old Tax Benefits BEFORE 30% BonusNEW Tax Benefits with 30% Bonus
Year 1 – Tax BenefitsYear 1 – Tax Benefits
Equipment Cost$100,000$100,000
IRS Sec. 179$24,000$24,000
Adjusted Basis$76,000$76,000
Bonus 30% 1st Year Depreciation N/A $22,800
Adjusted Basis$76,000$53,200
1st Year Percentage of 5 Year Depreciation20.00%20.00%
Depreciation$15,200$10,640
Total 1st Year Write Off$39,200$57,440
Tax ($) Benefits Est. income tax bracket: 35.5%$13,916$20,391
Equipment Cost - After Year 1 Tax Benefits$86,084$79,609


Additional Savings: $6,475





The above is a possible tax scenario. Consult an accountant to maximize your actual tax benefit.


Source: Group Financial Services.