Section 179 of the Internal Revenue code allows for a 2007 business deduction of $125,000 for capital expenditures (including new and used machine tools) up to an overall investment limit of $500,000, retroactive to the start of 2007.  To capture this deduction this calendar year, your equipment must be placed in service before December 31, 2007.

There’s one negative aspect to Section 179, which you should be aware.  Every capital dollar spent above $500,000 will reduce your Section 179 deduction by $1.00.  For example, if you spend $520,000 on capital equipment this year, your deduction would be reduced by $20,000 ($520,000 - $500,000), and therefore, would limit your overall deduction to $105,000 ($125,000 - $20,000).

If this opportunity makes sense to you, we recommend that you contact your accountant as soon as possible so he can evaluate your situation.