Forgive me, but I’m not exactly turning cartwheels over the economic stimulus checks that have been arriving in mailboxes for the past few weeks. On one hand, I recognize the checks are a uniquely American way to jumpstart our anemic economy: Here’s some free money and it’s your patriotic duty to go out and spend it! What red-blooded American can resist those marching orders?
On the other hand, gas prices are edging ever closer to $4 a gallon. And when I sit down and do the math, I see that if I were to devote my own stimulus check solely to fueling my pickup truck, I’d be able to fill it up just seven times before the money ran out, which is depressing no matter how you look it.
Still, President Bush’s economic aid plan has some little-known positive aspects to it that can help small businesses get ahead this summer. Chief among these is the depreciation bonus provision. Simply put, this depreciation bonus allows you to deduct 50 percent of new “property” purchased and put into service this year. And this doesn’t merely apply to the funds the government is distributing to help the economy. Before the new law, businesses could deduct up to $128,000 in new equipment or property purchases. Now, that amount has increased to $250,000 and the threshold for reducing that deduction has been raised to $800,000.
There are some catches, of course. Businesses not on a calendar year should be aware that the higher expense limits apply only to tax years beginning in 2008 – so you can’t take advantage of the depreciation bonus until your new fiscal tax year begins. But it’s still a good deal if you’re in the market for new equipment. Talk with a tax professional or financial adviser before pulling the trigger on any new purchases. Experts say economic downturns are often great times to expand a healthy business. If you’re in good shape financially, now could be the time to update your fleet or add new equipment types and expand your service portfolio.
Visit www.irs.gov/pub/irs-pdf/p553.pdf for a detailed description of the business provisions contained in the Economic Stimulus Act of 2008.