This is Jean Wetzler.
I'm talking with Stephanie Harrison-Colbert from the IRS Small Business/Self-Employed division about the Economic Stimulus Act of 2008.
Stephanie, this legislation delivers payments to individuals, but it also contains some important business provisions.
One is Special Depreciation.
The other is Section 179 Depreciation.
What is Section 179 Depreciation?
In general, a taxpayer who meets certain requirements can choose to deduct all of the costs of qualifying property in the year it is placed into service instead of deducting it over several years.
This is called Section 179 Depreciation, after the section of the tax code that deals with this type of property.
It's a way small businesses can recover some of their costs quickly.
What effect does the Stimulus Act have on Section 179 Depreciation?
The act changed two things.
It increased the amount of the deduction and it raised the phase-out amount.
Without the new law, the 179 Depreciation deduction limit in 2008 would have been $128,000.
It's now increased to $250,000.
The phase-out rule reduces the allowable deduction if the amount of Section 179 property you place in service exceeds a set amount for the year.
The amount would have been $510,000 for 2008, but now, it's $800,000.
This is a great tax incentive for someone purchasing a large asset.
Does it have any effect on a small business that isn't planning a large purchase before the end of 2008?
Many small businesses sell assets that qualify as Section 179 property.
These tax rules can be additional selling points.
For instance, you're a small business owner trying to convince a customer on a budget to buy equipment from you.
You can make that customer aware that, if he buys the equipment and places it into service in 2008, the tax break could lower the total amount invested in the purchase.
Where can small business owners learn more?
I suggest talking to your tax professional about how you can best take advantage of the tax provisions, depending on your circumstances.
Our Web site, at IRS.gov, is the best source of economic stimulus information from the IRS.
Look for the "stimulus payment" graphic on our homepage, then scroll down to find information about the business provisions.
As further guidance is issued, we'll be updating our Web site, so check back frequently.
Thank you, Stephanie.
I've been talking with Stephanie Harrison-Colbert of the IRS.
This is Jean Wetzler.
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