Economic Recovery Act: Business Incentives

The 2009 Economic Recovery Act encourages businesses to invest in new equipment:

• Increase Section 179 Deduction to $250,000. The Section 179 deduction allows businesses to write off up to $250,000 in equipment purchases in one year, rather than spreading them out over the typical "amortization" period of 3 to 15 years. The prior limit was $125,000. This credit is reduced if the total investment is $800,000 or more. The equipment must be NEW and used at least 50% in the business and must be tangible (a "thing" or computer software). If the deduction creates a loss for your business, you can carry forward that loss for future tax years. There are deduction limits for cars and trucks (see Limitations for vehicles, below).

Limitation for vehicles used in business The IRS limits the annual depreciation/Section 179 deduction that you can take on cars and trucks. However, this limit has just been doubled to $8000. This limit is for most cars and trucks EXCEPT:

• Trucks, vans and SUVs built on truck chassis with unloaded weight exceeding 6,000 pounds OR which have been specially modified (see IRS Rev Procedure 2004-20).

This deduction limitation (Section 280F) is complicated, so if you are deducting a car or truck using Section 179 or bonus depreciation, please consult a tax advisor or the IRS.

These incentives are for your 2008 and 2009 tax years only.