Introduction
You have to spend money to make money. Congress made investing in your business a lot easier this year by passing the Economic Stimulus Package for the American People Act of 2008, a bill signed by President Bush.
By now, you've heard a lot about the economic stimulus package, but do you really know what it could mean for your bottom line?
In addition to providing one-time stimulus payments for all taxpayers, the package doubles the small business expensing limit from $125,000 to $250,000 and increases the overall investment limit from $500,000 to $800,000. It also includes tax incentives for investments of more than $800,000.
Make the most of the economic stimulus package
Know what qualifies: Heavy machinery, computers, office furniture, equipment and vehicles can be deducted under Section 179 of the U.S. tax code. What doesn't qualify? Investments in property, including land and building upgrades.
Act fast: To take advantage of the higher expensing limits, you have to purchase the equipment and place it in service in 2008, which means actually using it or setting it up to be used. After this year, the expensing limit drops to around $128,000 for 2009 and to $25,000 after 2010, unless Congress passes legislation to extend or make permanent the higher expensing limit.
Maximize your deduction: Get the most bang from the increased expensing limit by investing up to $250,000 in your business this year. You can expense the entire $250,000 in investments, dollar for dollar, up to $800,000.
Consult your accountant: The stimulus package also provides a 50 percent bonus depreciation deduction, which could be used to supplement the tax advantages of Section 179 expensing or generally could be used for more expensive investments. Bonus depreciation lets you take an immediate deduction of 50 percent of the investment rather than deducting the value over a number of years. If you are considering an investment that goes beyond $800,000, talk to your accountant, who can help you figure out how to maximize your tax savings.
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