Resources

Articles & Tips

Tax Tidbit 2/08: 2008 Economic Stimulus Act - Business Tax Incentives

To help jumpstart the slowing U.S. economy, Congress has passed two valuable business tax breaks in the Economic Stimulus A ct of 2008 . The new law nearly doubles the amount of deductible Code Sec. 179 expensing for 2008 and also provides for bonus depreciation.

Small business expensing -  Before the new law, a business could expense up to $128,000 of the cost of qualifying property in 2008. If the cost of qualified property placed in service during the year is more than $510,000, the ceiling for that business is reduced by the amount over the applicable limit. Under the new law, a business can expense up to $250,000 of the cost of qualifying property and the old $510,000 ceiling jumps to $800,000.

Bonus depreciation - The other incentive is bonus depreciation. The new law provides qualifying taxpayers 50 percent first-year bonus depreciation of the adjusted basis of qualifying property.

To be eligible to claim bonus depreciation, property must be (1) eligible for the modified accelerated cost recovery system (MACRS) with a depreciation period of 20 years or less; (2) water utility property; (3) computer software (off-the-shelf); or (4) qualified leasehold property. The property generally must be purchased and placed in service for original use during 2008.  

If you have any questions about the business tax breaks in the new law, please contact Andrew D. Ross, CPA at (908) 782-7900 x 113 or adr@bkc-cpa.com, at your earliest convenience to arrange an appointment. Enhanced expensing and bonus depreciation really can make a difference in your tax savings. Moreover, because it's still early in the year, we can develop a tax strategy that uses maximize your tax savings for 2008.