Financing Information for Sweeping Professionals
Outline of the 2008 Economic Stimulus Package
by Ranger Kidwell-Ross
On February 13, 2008, President Bush signed the 2008 Economic Stimulus Act. Although recent media coverage has focused on benefits for the individual taxpayer, this new bill also offers significant incentives to spur business investment.
Like many bills passed by Congress, the economic stimulus bill is full of complex and specialized language that can be difficult to understand. However, outlined in plain language below are the two key provisions that small business owners should be fully aware and knowledgeable of prior to moving forward:
Section 179 Expensing
1. Internal Revenue Service Section 179 allows businesses to take a one-time expensing of qualifying equipment purchased and placed into service in a given year. The 2008 Economic Stimulus Act raises the 2008 deduction limit from $125,000 to $250,000. In addition, the cap of qualifying equipment has been raised to $800,000.
This provides small business owners with an immediate deduction for the entire cost of certain investments made in their business, such as purchasing new equipment. The cap means that the provision applies only to small business owners who invest less than $800,000 in their business this year.
This means that a business may purchase and place in to service $800,000 worth of qualifying equipment and immediately expense up to $250,000. Section 179 Expensing is in addition to the normal first year MACRS (Modified Accelerated Cost Recovery System) depreciation deduction. Section 179 Expensing for businesses acquiring more than $800,000 in 2008 will see the $250,000 deduction limit reduced on a dollar for dollar basis.
50% Bonus Depreciation
The 2008 Economic Stimulus Act also allows for a bonus depreciation of an additional 50% for qualifying equipment purchased and placed into service in 2008. This allows businesses to depreciate more of an assetŐs cost up front, thus accelerating the tax savings they would receive by depreciating that asset.
This means a business can take an immediate deduction of 50 percent of the investment, rather than deducting the value over a number of years. Unlike expensing, the bonus depreciation deduction would apply to investments that exceed the $800,000 limit.
A Benefit Example
Here is an example of how the 2008 Economic Stimulus Act could help your bottom line:
My Great Sweeping Company purchases $500,000 worth of qualifying equipment (sweepers, for example) in 2008 and chooses to take both the allowable Section 179 deduction and 50% bonus depreciation:
The bottom line is that both of these provisions put money back in the hands of small business owners so they can grow their businesses this year. Please contact your accountant or other financial advisors if you have any questions about this legislation.
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