Economic Stimulus Act Tax Incentives

[RAHiggins1]

Below are changes made for this tax year by the (ESA);

As I understand it, in 2008, under Section 179, small businesses that purchase less than $800,000 of capital assets are allowed to WRITE-OFF THE FULL PURCHASE PRICES of the equipment (up to $250,000). These tax savings are for 2008 only. The equipment must be put into use between December 31, 2007 and January 1, 2009.

Can anyone knowledgable in tax law confirm that one could go buy everything they need before the end of the year to start or equip their own restaurant or other business?

http://www.irs.gov/formspubs/article/0,,id=177054,00.html

2008 Changes

Increased Section 179 limits. The maximum section 179 deduction you can elect for qualified section 179 property you placed in service in tax years that begin in 2008, has increased to $250,000 ($285,000 for qualified enterprise zone property and qualified renewal community property). This limit is reduced by the amount by which the cost of section 179 property placed in service in the tax year exceeds $800,000. For qualified section 179 Gulf Opportunity (GO) Zone property placed in service in certain counties and parishes of the GO Zone, the maximum deduction is higher than the deduction for most section 179 property.

Special depreciation allowance for certain property. You may be able to take an additional first year special depreciation allowance for certain qualified property (defined below). The allowance is an additional deduction of 50% of the property’s depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction).

Property that qualifies for this special depreciation allowance include the following.

Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less

Water utitiliy property

Off-the-shelf computer software

Qualified leasehold improvement property

Qualified property must also meet all of the following tests.

You must have acquired qualified property by purchase after December 31, 2007, and before January 1, 2009. If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify.

Qualified property must be placed in service after December 31, 2007, and before January 1, 2009 (before January 1, 2010, for certain transportation property and certain property with a long production period).

The original use of the property must begin with you after December 31, 2007.

Property that does not qualify for special depreciation allowance include the following.

Property placed in service and disposed of in the same tax year.

Property converted from business use to personal use in the same tax year it is acquired. Property converted from personal use to business use in the same or later tax year may be

Depreciation limits on business qualified GO Zone property.

Property required to be depreciated under the alternative depreciation system (ADS).

Property included in a class of property for which you elected not to claim the special depreciation allowance.vehicles

Depreciation limits on business vehicles. The total depreciation deduction (including the section 179 deduction) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2008 is $2,960 ($10,960 for automobiles for which the special depreciation allowances applies). The maximum deduction you can take for a truck or a van you use in your business and first placed in service in 2008 is $3,160 ($11,160 for trucks or vans for which the special depreciation allowance applies).

Caution. These limits are reduced if the business use of the vehicle is less than 100%

[Octaveman]

Essentially, Section 179 deduction states that you can deduct up to the $250k limit the full cost of equipment that will be used in your business in 2008 tax year. The purchase date and date put into service must be no later than 12/31/08. Any excess over the $250k limit has to be depreciated under MACRS. Section 179 has been around for a while now but the limits were doubled for this year. So yes, if anyone was thinking about doing some equipment buying, now would be a good time because as of right now, the limit will drop back down for 2009.

Here are a few links to look over to give you more specifics as to what type of equipment is allowed and disallowed.

General info: http://www.taxguru.org/incometax/Rates/Sec179.htm

IRS Deprec Info: http://www.irs.gov/publications/p946/index.html

IRS Section 179 info: http://www.irs.gov/publications/p946/ch02.html