Economic Stimulus Act Depreciation Changes 2008
Posted: 5/27/2008
2008 Changes to Depreciation
Review of the Economic Stimulus Act of 2008
Boosted section 179 expensing: Section 179 allows taxpayers to immediately write off qualifying purchases as opposed to depreciating the cost over the asset’s life. This is an immediate deduction that otherwise would be deferred.
Both the amount of section 179 allowed and the expensing limit have been increased for 2008 only.
|
Old |
New |
Increase |
|
| Section 179 expense | $128,000 |
$250,000 |
$122,000 |
| Annual acquisition limit | $510,000 |
$800,000 |
$290,000 |
When the cost of qualifying property purchased exceeds the annual acquisition limit, it reduces the amount of section 179 expense allowed dollar for dollar. For example, if a taxpayer purchases $900,000 in qualifying property the section 179 expense allowed is reduced by $100,000 down to $150,000.
Bonus depreciation makes a comeback:
The same bonus depreciation that was allowed after September 11, 2001 will once again be allowed for the year 2008.
For new property only, 50% of the asset’s cost is eligible for first year bonus depreciation.
Effective date differences:
For calendar year taxpayers, both the section 179 and bonus depreciation are effective for calendar year 2008. However for fiscal year businesses, the expanded section 179 applies to the fiscal year beginning in 2008, while the 50% bonus depreciation applies from January 1 to December 31, 2008.
Tax planning summary:
For taxpayers considering new investment or expansion the incentives for proceeding during 2008 are greater than waiting until a later year. Current year deductions allowed by the section 179 expensing and bonus depreciation can reduce the effective cost of purchasing new machinery and equipment.
Please contact our office for more information.
Sincerely,
Arend, Laukhuf & Stoller, Inc.
Please contact us and we will be happy to meet with you.