[nylex]

I have purchased equipment for my business that cost $14,500.00
It will de depreciated over 10 years
My problem is I do not know how to enter the Tax break - the entry will be $7250.00 in expenses - what is the other side of the entry
Next year what figure do I use to depreciation the equipment - the $14500 less this years depreciation and less the $7250 as well

[ROLCAM]

The usual entry for booking depreciation is:

DEBIT Depreciation Account
CREDIT Provision for Depreciation Account

[ArcSine]

Nylex, it sounds like you're asking about the 50% first year "bonus" depreciation for federal tax purposes, which was extended through this year for qualifying assets. Assuming that's the case, then your first year (2009) depreciation expense will be the bonus of 7,250 plus regular depreciation on the remaining 7,250.

Then for each subsequent year you'll take regular depreciation on that half of the asset that wasn't expensed off to the bonus allowance in the first year.

It's helpful to think of your asset as being two assets of 7,250 each. One of them gets entirely expensed to depreciation in the first year, and the other gets regular depreciation across its customary tax life, starting with the acquisition year.

Side note: Check your state's tax law. Not all states adopted the federal 1st-year bonus rules. You may have a federal-state difference on your returns for depreciation expense.