If you are self employed and are trying to decide whether to purchase that additional piece of equpment, be aware that in 2011, you can write off equipment under section 179 up to $500,000. This will phase out after you have purchased $2,000,000 in assets. Congress also upped the 50% bonus depreciation in 2010 to 100% in 2011 (they want people to buy equipment) so you can pretty much write off everything! (Federal only: state rules have nothing to do with the federal rules).
Section 179 assets are only deductible if you have income. To generate a loss it is better to use the bonus depreciation. Here is a planning strategy: if your business had income in the last few years, don’t elect sec 179; use the bonus depreciation instead, create the loss, carry it back to the year(s) of income and get a refund.
If your business didn’t have income before, but you expect income in the next few years, you can use the 179 to wipe out 2011 income, then can carry it forward to wipe out future income. You will probably want to talk about this planning as each situation is different.