Kiss Small Ticket Leasing Goodbye

Kiss Small Ticket Leasing Goodbye

After months of wrangling, Congress seems set to

deliver a big tax break to Americans, some $350 billion

worth of tax cuts to be exact, including relief for

investors, married couples and parents.

Congress must pass the tax bill, approved Wednesday

by a subcommittee of members from both chambers,

and be signed into law by President Bush.

Experts predict this will happen as early as Friday.

It appears that small ticket leasing may not be

favourable under the new law since a lessee will more

likely want to own the equipment and grab the 50%

first year bonus.

Too early to tell, but it does not like good. Bush and

Congress think that if they provide great depreciation

rates that small business will buy a lot of equipment.

That only works if they either have the cash (which

they don't) or can access the credit markets (which

they can't).

Anything can change from now until when Bush signs

the bill. However, if past tax bills are an indication,

Bush will sign it quickly and probably make a speech

over the Memorial Day weekend.

I predict that banks and captives will do well by making

targeted loans and brokers/indies will not since they will

not have a competitive product to take advantage of

this proposed change in MACRS.

Joint Committee on Taxation

The conference agreement provides an additional first-

year depreciation deduction equal to 50 percent of the

adjusted basis of qualified property. In general, in order

to qualify for the 50-percent additional depreciation

deduction, the property must be acquired after May 5,

2003, and before January 1, 2005.

The conference agreement provides that the maximum

dollar amount that may be deducted under section 179

is increased to $100,000 for property placed in service

in taxable years beginning in 2003, 2004, and 2005. In

addition, for purposes of the phase-out of the

deductible amount, the $200,000 amount is increased

to $400,000 for property placed in service in taxable

years beginning in 2003, 2004, and 2005.

Jeff Taylor, CPA, CLP