Disclaimer of Liability
The information in this e-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice,
accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be
used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any
decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to
your particular situation.
The author of the tax articles in this e-newsletter did not intend nor write the advice to be used to avoid any penalty imposed by a
taxing authority, nor may any user/recipient of this document use this document's written tax advice for that purpose. This
document's tax advice was written specifically to support the promotion or marketing of the transaction/matter addressed by the
written tax advice. Therefore, any user/recipient of this document should seek an independent tax professional's advice regarding
the user/recipient's particular circumstances.
The information is provided "as is" with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and
without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness
for a particular purpose.
The information in this e-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice,
accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be
used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any
decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to
your particular situation.
The author of the tax articles in this e-newsletter did not intend nor write the advice to be used to avoid any penalty imposed by a
taxing authority, nor may any user/recipient of this document use this document's written tax advice for that purpose. This
document's tax advice was written specifically to support the promotion or marketing of the transaction/matter addressed by the
written tax advice. Therefore, any user/recipient of this document should seek an independent tax professional's advice regarding
the user/recipient's particular circumstances.
The information is provided "as is" with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and
without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness
for a particular purpose.
| Serving the Central Pennsylvania area since 1981 |
| Robert A. Romako, CPA |
| ECONOMIC STIMULUS ACT BENEFITS FOR BUSINESS |
All the hype over the Economic Stimulus Act of 2008 has centered around the tax rebates to be
paid to individuals. Buried within the Act, however, are several juicy business incentives that
savvy owners may want to use to their advantage.
Boosted section 179 expensing. Under current law, taxpayers can expense up to
$128,000 in new and used equipment purchases for an immediate tax deduction. This is in lieu of
depreciating the assets over their IRS useful lives. If asset purchases exceed $510,000 for 2008,
the amount qualifying for expensing is reduced. Under the Act, the expensing amount increases
to $250,000 for tax years beginning in 2008, and the phase out point for total asset purchases is
increased to $800,000. After 2008, the maximum expensing amount and phase out points revert
to their old limits, as indexed for inflation. Businesses planning major fixed asset additions may do
well to plan for those assets to be placed in service during their 2008 tax year to gain the tax
benefits of immediate expensing.
Bonus first-year depreciation. You may recall the bonus depreciation concept was
introduced in 2001 following the terrorist attacks, but was in effect for 2 years only. The 2008 Act
reintroduces bonus depreciation for assets placed in service during calendar year 2008. It allows
a first-year depreciation deduction of 50% of the cost of assets; eligible assets include most fixed
assets having a depreciable life of 20 years or less. Interestingly, the Act also adds an additional
$8,000 to the first year depreciation limits for luxury automobiles. Obviously, this represents a
powerful incentive to time asset purchases to occur in 2008.
The section 179 expensing and bonus first-year depreciation will both follow the same rules for
AMT purposes, so no hidden ATM tax will be created as a result. Pennsylvania has not
announced its intent to follow the 2008 Act. Presumably, Pennsylvania will continue to follow its
own rules limiting section 179 depreciation to $25,000 and allow the bonus first-year depreciation
to be deducted over 7 years as it provided in 2001.
paid to individuals. Buried within the Act, however, are several juicy business incentives that
savvy owners may want to use to their advantage.
Boosted section 179 expensing. Under current law, taxpayers can expense up to
$128,000 in new and used equipment purchases for an immediate tax deduction. This is in lieu of
depreciating the assets over their IRS useful lives. If asset purchases exceed $510,000 for 2008,
the amount qualifying for expensing is reduced. Under the Act, the expensing amount increases
to $250,000 for tax years beginning in 2008, and the phase out point for total asset purchases is
increased to $800,000. After 2008, the maximum expensing amount and phase out points revert
to their old limits, as indexed for inflation. Businesses planning major fixed asset additions may do
well to plan for those assets to be placed in service during their 2008 tax year to gain the tax
benefits of immediate expensing.
Bonus first-year depreciation. You may recall the bonus depreciation concept was
introduced in 2001 following the terrorist attacks, but was in effect for 2 years only. The 2008 Act
reintroduces bonus depreciation for assets placed in service during calendar year 2008. It allows
a first-year depreciation deduction of 50% of the cost of assets; eligible assets include most fixed
assets having a depreciable life of 20 years or less. Interestingly, the Act also adds an additional
$8,000 to the first year depreciation limits for luxury automobiles. Obviously, this represents a
powerful incentive to time asset purchases to occur in 2008.
The section 179 expensing and bonus first-year depreciation will both follow the same rules for
AMT purposes, so no hidden ATM tax will be created as a result. Pennsylvania has not
announced its intent to follow the 2008 Act. Presumably, Pennsylvania will continue to follow its
own rules limiting section 179 depreciation to $25,000 and allow the bonus first-year depreciation
to be deducted over 7 years as it provided in 2001.
FEBRUARY 2008
| Robert A. Romako, CPA Phone:717.774.3047 |