The “50% bonus depreciation” that Congress passed last spring to encourage investment in new equipment lowered the “effective” tax rate on new tractors to 15% from 27%, and on trucks and trailers to 17% from 29%, according to an October 2, 2003 report by Jane Gravelle of the Library of Congress' Congressional Research Service.
The average effective tax rate for all equipment dropped to 15% from 26%, while the tax rate for structures, most of which do not qualify for bonus depreciation, declined to 29% from 32%.
Effective rates take into account the timing of deductions and present a single rate over the life of an investment rather than the annual rate, which varies from year to year.
