Business Tax Breaks – Use Them or Lose Them!

A recent report issued by the Joint Committee on Taxation included a list of business tax breaks that will be expiring at the end of 2009, barring any additional extensions by Congress.  Many of the deductions have been previously extended on a year-by-year basis, including the recently enacted American Recovery and Reinvestment Act of 2009.   While some of these provisions may ultimately be extended, business clients are encouraged to review the expiring provisions.  Where it makes good business sense, take action now to prevent losing out on the tax breaks if they are not extended.

• Additional first-year 50% bonus depreciation for qualified property – Qualified property is allowed a 50% depreciation (bonus depreciation) in the year that the property is placed in service (with corresponding reductions in basis and reductions of the regular depreciation deductions otherwise allowed in the placed-in-service year and in later years).  In addition, an $8,000 increase in the first-year depreciation limit for passenger automobiles that are qualified property is also extended through 2009.  (Certain aircraft and long-production-period property can continue to be placed in service through 2010.)

• Increased Sec. 179 expensing election – The increased expensing election up to $250,000 (with an $800,000 investment ceiling limit) is extended through 2009. Taxpayers can elect to deduct the cost of any section 179 property, generally equipment, placed in service during the tax year as an expense which is not chargeable to a capital account.  (For 2010, without Congressional action, expensing will be limited to $125,000 with a $500,000 investment ceiling limit (both figures indexed for inflation)).

• Faster depreciation for farm machinery – Five-year depreciation for farming business machinery and equipment. 

• Fifteen-year cost recovery for leasehold improvements – Fifteen-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements.  

• Incremental research credit – A taxpayer is generally allowed a research credit of 20% of the amount by which the taxpayer’s qualified research expenses exceed a specific base amount (unless the taxpayer elects the alternative simplified credit computation).

• Accelerate AMT and research credits – Election to accelerate AMT and research credits in lieu of additional first-year depreciation.

Please call this office if you have questions about how these tax breaks can be applied to your business. This and other great articles can be found in our April 2009 Newsletter. If you haven’t signed up you can do so by clinking here Sign Me Up for The Anderson Monthly Newsletter.

Posted by Clint Coons, asset protection attorney, Seattle, Washington 

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