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What the Economic Stimulus Law Means to You!
By Sandy Botkin
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"Where there is an income tax, the just man will pay more and the unjust less on the same amount of income." — Plato
As in Plato’s day, most people know that the government stimulus law (which is known as the American Recovery and Reinvestment Act of 2009) is a giant bailout for some folks: namely large businesses. When I say “giant", I wasn’t kidding. The Act consists of thousands of pages. In fact, the entire text of the bill, and that of the previous economic stimulus act, is so huge that they might barely fit in a Winnebago! Congress must have purchased them, plus the vehicle to deliver such huge legislations, at either Wal-Mart of Costco.
Unknown too many people, however, is that there are a number of provisions that apply to both individuals and small businesses. I will try to summarize some of these provisions so you can see how this new law can apply to you.
Small Business Provisions:
- Automobile depreciation increased: In 2009, the maximum depreciation that you can take this year for a passenger automobile was going to be $3,160. This number was increased by $8,000 to $11,360 for the first year alone.
- 50% Bonus Depreciation: In addition to any depreciation taken on equipment, you can get an additional 50% bonus depreciation. This applies to any tangible equipment used in business and not to buildings. This is especially good for SUVs where business taxpayers can elect to write off only $25,000 of the business use of the SUV in the first year alone. Example: Sam buys a Cadillac Escalade for $54,000 and uses it about 92% for business. Thus, the business use is $50,000. Sam may elect to deduct the first $25,000 of the business use PLUS he would get 50% bonus depreciation of the remaining $25,000, which would be an additional $12,500 of depreciation. Moreover, he would get regular depreciation of the remaining $12,500 which would be taken over the forthcoming six years. The result is that you would be effectively deducting about 80% of the business use of a qualified SUV!
- $250,000 special expense rule: You know the old golden rule, "he who has the gold, makes the rules." Since the government has the gold…or at least prints enough money to buy all of Fort Knox multiple times, they have limited depreciation of equipment. Usually equipment gets depreciated over 5-7 years depending on the equipment. However, now a small business can elect to deduct up to $250,000 worth of equipment in the year of purchase. However, Congress is an Indian giver. In order to take this deduction, the equipment must be new to you and purchased this year. Secondly, the equipment must be used over 50% for business. Finally, the total purchase of all equipment must be less than $800,000 or some of this $250,000 will be phased out.
- Transit pass exclusion increased to $230: In 2009, you can provide transit passes to your employees of up to...
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