small biz new equipment expense 100k

New lower income-tax rates will benefit many small-business owners, since most pay taxes on their profits as individual income. Thanks to the new tax law just passed, rates at higher income levels dropped by two percentage points, effective December 31, 2002. Also, small businesses will be allowed to expense as much as $100,000, up from $25,000, of new equipment annually, and receive a 50% bonus write-off for new equipment, up from 30% currently.

asr: wow, it is much economical to buy machines/equipment for business than employee salary ( which adds 15% payroll tax) ..
The Treasury Department has estimated that for 2003, some 23 million self-employed business people will receive tax cuts averaging $2,209, thanks to the package.

The corporate federal tax rates top out at 35%. Yet nearly 70% of small-business owners either paid a federal tax rate of 15% or didn't pay federal income taxes at all in 2001, according to labor-backed Washington, D.C., lobbying group Citizens for Tax Justice. The remainder for the most part are taxed at the highest personal income-tax rate, which will drop to 35% this year from 38.6% in 2002 for married couples filing jointly.

Note, however, that these individual tax rates don't account for other taxes self-employed business owners pay. In addition to federal taxes, sole proprietors and S corp. owners must pay self-employment taxes to the tune of 15.3% (self-employment taxes cover Medicare and Social Security taxes). Employees at corporations, on the other hand, get to split that cost -- the company pays half, and the employee pays half.