From: Will the Economic Stimulus Act Make A Difference?
What’s in the 2008 Economic Stimulus Act?
On February 13, 2008, President Bush signed the Economic Stimulus Act (ESA). In addition to providing tax rebate checks to lower- and middle-income families, the ESA temporarily reinstates the depreciation bonus and increases Section 179 expensing limits. These provisions can mean potentially big tax savings for you.
There are two key benefits, according to Ron Riecks, general manager of Wells Fargo Construction, a division of Wells Fargo Equipment Finance Inc.
Bonus depreciation—Without the 2008 stimulus package, a purchaser could depreciate equipment on a straight-line basis over the permitted life of the item pursuant to the MACRS rules (MACRS stands for Modified Accelerated Cost Recovery System. Under MACRS, different types of property are assigned applicable recovery periods and depreciation methods.) For example, an $800,000 piece of construction equipment in the 10-year MACRS category would depreciate at 10% each year for the next 10 years, resulting in an $80,000 depreciation deduction each year.
But under the Economic Stimulus Act of 2008, a taxpayer can take 50% depreciation during the first year and depreciate the remaining 50% over the applicable 10-year period. That would result in a deduction of $440,000 for 2008 ($400,000 plus the regular 10% of the remaining 50%).
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Expense deduction—The available Section 179 expense deduction may allow your company to almost double the amount of equipment that can be expensed—from $128,000 to $250,000 for your 2008 tax year. For example, if a taxpayer purchases a $700,000 crane, then under Section 179, it may deduct $250,000 (provided the firm has taxable income in that amount) in equipment expenses unless their total 2008 equipment purchases are more than $800,000 in the 2008 tax year.
Prior to the new law, the deduction would have been capped at $128,000. The availability of this deduction decreases if the taxpayer purchases more than $800,000 of equipment in this tax year and is not available at all if they purchase over $1,050,000 of equipment during the tax year.
September-October 2008
From: Will the Economic Stimulus Act Make A Difference?
What’s in the 2008 Economic Stimulus Act?
On February 13, 2008, President Bush signed the Economic Stimulus Act (ESA). In addition to providing tax rebate checks to lower- and middle-income families, the ESA temporarily reinstates the depreciation bonus and increases Section 179 expensing limits. These provisions can mean potentially big tax savings for you.
There are two key benefits, according to Ron Riecks, general manager of Wells Fargo Construction, a division of Wells Fargo Equipment Finance Inc.
Bonus depreciation—Without the 2008 stimulus package, a purchaser could depreciate equipment on a straight-line basis over the permitted life of the item pursuant to the MACRS rules (MACRS stands for Modified Accelerated Cost Recovery System. Under MACRS, different types of property are assigned applicable recovery periods and depreciation methods.) For example, an $800,000 piece of construction equipment in the 10-year MACRS category would depreciate at 10% each year for the next 10 years, resulting in an $80,000 depreciation deduction each year.
But under the Economic Stimulus Act of 2008, a taxpayer can take 50% depreciation during the first year and depreciate the remaining 50% over the applicable 10-year period. That would result in a deduction of $440,000 for 2008 ($400,000 plus the regular 10% of the remaining 50%).
Expense deduction—The available Section 179 expense deduction may allow your company to almost double the amount of equipment that can be expensed—from $128,000 to $250,000 for your 2008 tax year. For example, if a taxpayer purchases a $700,000 crane, then under Section 179, it may deduct $250,000 (provided the firm has taxable income in that amount) in equipment expenses unless their total 2008 equipment purchases are more than $800,000 in the 2008 tax year.
Prior to the new law, the deduction would have been capped at $128,000. The availability of this deduction decreases if the taxpayer purchases more than $800,000 of equipment in this tax year and is not available at all if they purchase over $1,050,000 of equipment during the tax year.