Here are a couple of tax-saving provisions of the new Economic Stimulus Act that haven’t gotten as much attention as the stimulus rebate checks about to be sent out.
Increased Section 179 Deduction
Section 179 allows first year expensing of certain depreciable property. Quick example–if you purchase a piece of machinery for $20,000, you could normally depreciate the property over five years, taking a $4,000 deduction each year. Under the new Section 179 limits, in 2008 you can deduct up to $250,000 ($125,000 in 2007) per year of qualifying property. Instead of deducting that $20,000 piece of machinery over five years, you could deduct the entire purchase price ($20,000) in 2008. For 2009-2010, the maximum deduction will revert back to $125,000. One of the limits of Section 179 is that it is limited to the taxable income of your business. For example, if your taxable income is $10,000. Your Section 179 deduction in the above example would only be $10,000. The remaining $10,000 of Section 179 deduction would be carried forward into future years.
Bonus 50% Depreciation
Under this rule, your business can immediately write off 50% of the cost of qualifying assets in the first year. The remaining cost can be deducted either through Section 179 or through regular depreciation deductions. Unlike Section 179, there is no taxable income limitation. For example, if you purchase a $30,000 piece of equipment and your taxable income is $5,000. You could claim bonus depreciation of $15,000–taking your taxable income down to a $10,000 loss. You could then claim regular depreciation on the remaining purchase price.
IRS Issues Warning Regarding Stimulus Rebate Check Scams
The IRS has issued warnings regarding e-mail and phone scams regarding the Economic Stimulus Act rebate checks. To view the warning, click on http://www.irs.gov/newsroom/article/0,,id=178061,00.html
