Maximizing the opportunities presented by the Stimulus Act (ARRA) will be of significant importance to business owners in 2009 and beyond. Key opportunities include a bonus depreciation deduction and the increase and extension of Section 179 expensing for qualified property. In this article, we’ll take a look at the major implications of the Stimulus Act and how you can maximize the opportunities that are associated with them. A full review of the new tax act is available at www.BSPJ.com.

Depreciation Breaks Have Been Extended

Bonus Depreciation - For property placed in service after December 31, 2008 and prior to January 1, 2010, the act provides an additional depreciation deduction equal to 50% of the adjusted basis of qualified property. "Qualified property" includes most types of new property other than buildings.

The act also extends Section 179 Expensing. This is a direct write-off of qualified personal property. For 2009, the recovery act increases the expensing limit to $250,000 with a ceiling of $800,000 in investment cost.

Careful Planning will be Needed

1. It is important to note that the marshalling order for fixed asset deductions is to utilize the Section 179 Expensing first and then see if bonus depreciation will help. THE 50% ADDITIONAL FIRST YEAR DEPRECIATION ALLOWANCE APPLIES TO QUALIFIED PROPERTY UNLESS THE TAXPAYER "ELECTS OUT". The election can apply to all property in any particular class.
2. Unfortunately, the economy and lending standards may put a damper on your planning. Many businesses are struggling and will not have the profitability to take advantage of these deductions. Alternatively, if decent profitability exists, lenders may not be in a position to lend money on assets that need to be acquired.
3. Every business needs to ask itself if deductions on business equipment make more sense for 2 or 3 years out as our economy improves. Timing of deductions is very important and the right time may not be in 2009 or 2010.
4. Additionally, there are indications that individuals in higher tax brackets and corporations are going to face tax increases to assist in reducing the United States deficit. This is another consideration to take in the timing of your deductions in order to get the maximum economic benefit from the deductions.

Contact Us for More Information

Would you like to learn more about how to maximize your depreciation deductions?

Our firm is based on building strong relationships and connecting with our clients - to make sure that no opportunities are missed. Please contact Barry Schimler at bschimler@bspj.com or 678.741.2510 or Marshall Schwartz at mschwartz@bspj.com or 678.741.2524 with any questions about steps you can take to maximize your opportunities for tax savings under ARRA.