When the business can benefit from a larger deduction, instead of depreciating the cost of equipment over the life of the property, consider electing first-year expensing. Alternatively, when the business cannot benefit from a current depreciation deduction because it does not have sufficient income to offset the deduction, consider electing alternative depreciation to spread deductions over future years. Time business equipment purchases carefully in view of the mid-quarter convention.
The taxpayer reduced their taxable income by $5,000 by taking the optimum write-offs for business equipment purchases. Since the taxpayers income was taxed at the 30% tax bracket, the income reduction may decrease their income taxes by $1,500 ($5,000 x 30%).
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by taking the optimum write-offs for business equipment purchases.