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Company I work for says there accountant says they need to buy new vehicle/equipment to reduce Taxes (using 100% depreciation)? I'm confused how this works, and if it is a longterm benefit ? Anyone know how explain the benefit to me...
Do you get to 100% depreciate the first year, and do the payments also get counted as a expenses the following years?
If not I don't see the benefit, example if company makes $100K profit in year and pay 25% tax, would owe $25k... If they buy $100k in equipment (say its financed for 4-5 years) and depreciate it 100% year one ; now profit $0 and taxes $0 for year one? But then year two thru five your paying lease payments of $20k+/year on that equipment and have no depreication on those years? (unless lease payments are a tax expense)...
What am I missing...