By Andy posted December 05, 2008 | Views: 2618
It was brought to my attention today, the Economic Stimulus Package of 2008 that sent everyone (except me) a rebate check also includes provisions for small business tax deductions.
It offers businesses a one-time depreciation tax deduction equal to 50% of the cost of specified types of new investments during 2008. What this means is that you can expense up to $250,000 for new equipment purchases and write-off up to 50 percent of the equipment's cost. There are also apparently more benefits for busineses who lease rather than buy. This is however TIME SENSITIVE. You must make the purchase before Jan 1, 2009 for it to qualify.
The following things generally qualify for this deduction:
- Property attached to the business but not part of the structure. For example printing press or large manufacturing tools. (Hello CNC)
- Machines purchased for business use (New routers, saws, sanders!)
Tangible personal property used in business (I honestly don't know what this is, exactly.)
- Business vehicles with a gross weight in excess of 6,000 lbs. (Does that come with a Hemi?)
- Office furniture/equipment (Three words: Leather Massage Chair)
- Computers and Software (a new laptop with QuickQuote?)
While it is a tough time to be going out and making purchases, essentially getting half off an expensive item courtesy of the government is a pretty good deal. Of course, the catch is you don't get the half off until your 2008 tax return gets filed.
See below for more information.
About the Author: Christopher Abate is the CEO Crystallyne Enterprises, maker of the QuickQuote Estimating Software. Abate can be reached at (508) 553-9600 or cabate@gmail.com . Visit his website at www.crystallyneonline.com
2008 Economic Stimulus Act Provides Tax Benefits to Businesses
IR-2008-22, Feb. 21, 2008
WASHINGTON — In addition to providing stimulus payments to individuals, the Economic Stimulus Act of 2008 provides incentives to businesses. These incentives include a special 50-percent depreciation allowance for 2008 purchases and an increase in the small business expensing limitation for tax years beginning in 2008.
50-Percent Special Depreciation Allowance
Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property over several years. It is an annual allowance for the wear and tear, deterioration or obsolescence of the property.
Under the new law, a taxpayer is entitled to depreciate 50 percent of the adjusted basis of certain qualified property during the year that the property is placed in service. This is similar to the special depreciation allowance was previously available for certain property placed in service generally before Jan. 1, 2005, often referred to as “bonus depreciation.” To qualify for the 50 percent special depreciation allowance under the new law, the property must be placed in service after Dec. 31, 2007, but generally before Jan. 1, 2009.
To reflect the new 50-percent special depreciation allowance, the IRS developed a new version of the depreciation and amortization form for fiscal year filers. The new form is designated as the 2007 Form 4562-FY and is available on this Web site.
New Depreciation Limits on Business Vehicles
The total depreciation deduction, including the section 179 deduction, a business can take for a passenger automobile, which is not a truck or van, used in the business and first placed in service in 2008 is $2,960 -- $10,960 for automobiles for which the special depreciation allowance applies. The maximum deduction that can be taken for a truck or van used in a business and first placed in service 2008 is $3,160 -- $11,160 for trucks or vans for which the special depreciation allowance applies.
Section 179 Expensing
In general, a qualifying taxpayer can elect to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property, after the relevant section in the Internal Revenue Code.
Under the new law, a qualifying business can expense up to $250,000 of section 179 property purchased by the taxpayer in a tax year beginning in 2008. Absent this legislation, the 2008 expensing limit for section 179 property would have been $128,000. The $250,000 amount provided under the new law is reduced if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $800,000.
The new law does not alter the section 179 limitation imposed on sport utility vehicles, which have an expense limit of $25,000.