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Year-end ’08 tax strategy: Ramp up business purchases

by on
in Small Business Tax,Small Business Tax Deduction Strategies

The economic stimulus bill passed at the beginning of the year provided one-time rebates of up to $600 apiece for individual taxpayers (more for those with kids). But that’s small potatoes compared to the boost for business owners.

Strategy:
Load up on new equipment before Jan. 1. Under the new law, you can cash in a bigger Section 179 deduction for 2008, plus a 50% “bonus depreciation” deduction. So there’s extra tax incentive to acquire qualified business assets this year.

Prior to the law change, the maximum Section 179 deduction for 2008 was $128,000 (inflation-indexed from $125,000). This deduction had to be phased out on a dollar-for-dollar basis for purchases costing more than $510,000 (inflation-indexed from $500,000).

The new law almost doubles the maximum deduction to $250,000 while hiking the phaseout threshold to $800,000. After this year, the figures revert to lower levels for 2009.

Icing on the cake: You can also claim bonus depreciation for qualified assets. This deduction may be claimed along with Section 179 and regular depreciation.

Tax payoff: You can currently deduct most, if not all, equipment you purchase and place in service by Dec. 31.

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