How to expense capital equipment

Many independent contractors do qualify for this tax provision under IRS Section 179. Here's how it works:

You can elect to directly expense in the current tax year the cost of equipment instead of depreciating it over a number of years. The dollar limit, which was only $24,000 in 2002, was increased to $100,000 for 2003, and has increased every year since. (Those in certain economically challenged regions may qualify for an even higher expensing limit.)

This expensing option applies whether you pay in full or finance your purchase, and it applies not only to IT equipment but to office furniture, cell phones, off-the-shelf software and, at present, some vehicles. In addition, expensing saves you the trouble of keeping ongoing depreciation schedules.

You must be profitable to use this write-off. And even if you are profitable, you may prefer not to expense so that you can use depreciation deductions later on if you expect to be in a higher tax bracket. Check with your CPA or other tax professional about your own situation.

To learn more about Section 179, including the current year amount, go to www.irs.gov.