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Temporary, Accelerated Capital Equipment Depreciation in 2009

Tax incentivesThe American Recovery and Reinvestment Act of 2009 has extended some of the 2008 business tax breaks for equipment purchases. These provisions have the ability to enhance your return-on-investment for equipment purchases in 2009, rather than waiting into next year.

Here’s how it works…

Expensing election for small business: (Section 179): In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write off the cost of these expenses in the year of acquisition in lieu of recovering those costs over time through depreciation. Last year, Congress temporarily increased the amount small businesses could write off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The new law extends these temporary increases for capital expenditures incurred in 2009. The bottom line: it’s not more money, it’s faster money, and you can get it this year on new capital equipment purchases.

Additional accelerated depreciation: Congress has used bonus depreciation in the past to encourage business investment (as happened post 9/11). The law allows qualifying taxpayers 50% of the cost of qualifying equipment as extra first-year depreciation. As with the expensing election above, this provision was for equipment placed in service in 2008 and has now also been extended to 2009. The 50% bonus depreciation can be taken if you exceed the $800,000 threshold of equipment purchased, so even larger businesses can take advantage of this provision. In addition, this “bonus” depreciation is only available for new equipment. Remember, this additional accelerated depreciation is in addition to normal depreciation you could take on a qualified purchase for tax purposes.

As you can see, these provisions have the potential to enhance your return-on-investment for equipment purchases in 2009.

As always, consult a tax professional for bottom-line information on whether your company or purchase qualifies.

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Scott Stone Cisco-Eagle's Director of Marketing. He has over 25 years of experience in the industry.