Factors Effective Tax Savings

Rateof depreciation
Marginal tax rate
 Rate Of Depreciation
 Depreciation refers to two very different but related concepts:
 a) Decline in value of assets
 b) Allocation of the cost of tangible assets to periods in which the assets are
used.
 Several standard methods of computing depreciation expense may be used,
including fixed percentage, straight line, and declining balance methods.
Depreciation expense generally begins when the asset is placed in service.
Example: A Depreciation expense of 100 per year for 5 years may be
recognized for an asset costing 500.
 In economics, depreciation is the decrease in the economic value of the capital
stock of a firm, nation or other entity, either through physical depreciation,
obsolescence or changes in the demand for the services of the capital in
question. If capital stock is C0 at the beginning of a period, investment is I and
depreciation  D, the capital stock at the end of the period, C1, is 
C0 + I - D.
 Marginal Tax Rate
 A marginal tax rate is the tax rate that applies to the last dollar of the tax base
(taxable income or spending), and is often applied to the change in one's tax
obligation as income rises:

 To calculate the marginal tax rate on an income tax:

 Let m be the marginal tax rate.
 Let t be the tax liability.
 Let i be the taxable income.
 In economics, marginal tax rates are important because they are one
of the factors that determine incentives to increase income; at higher
marginal tax rates, some argue, the individual has less incentive to
earn more. This is the foundation of the Laffer curve which shows
taxable income decreasing as a function of marginal tax rate, and
therefore tax revenue begins to decrease after a certain point.

 Public discussion of "high taxes" may refer to overall tax rates or

marginal taxes.
 Lease
A written agreement under which a property
owner allows a tenant to use the property for a
specified period of time and rent.
 Lease includes:

 Names of the parties of the agreement.

 The starting date and duration of the agreement.
 Identifies the specific object (by street address, or make/model serial
number) being leased.
 Provides conditions for renewal or non-renewal.
 Has a specific consideration (a lump sum, or periodic payments) for granting
the use of this object.
 Has provisions for a security deposit and terms for its return.
 May have a specific list of conditions which are therein described as Default
Conditions and specific Remedies.
 May have other specific conditions placed upon the parties such as
◦ need to provide insurance for loss
◦ restrictive use
◦ which party is responsible for maintenance
 Purchase
 To obtain ownership of a security or other asset in
exchange form money or value called purchase.
 Purchasing refers to a business or organization
attempting for acquiring goods or services to accomplish
the goals of the enterprise. Though there are several
organizations that attempt to set standards in the
purchasing process, processes can vary greatly between
organizations. 
 Hire Purchase
An agreement under which goods are let on hire
and under which the hirer has an option to
purchase them in accordance with the terms of the
agreement.
Here possession of goods is transferred
immediately, but payment is made in
installments. Ownership is transferred after all
the installments have been paid.