- Extend $250,000 "first-year expensing" (2009)
- Extend 50% "bonus depreciation" (2009)
- Carry back NOL
- Cut tax for investments in small businesses
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Now let?s talk about some breaks for small business. This is where lots of the action lies because small business creates most of the wealth in the country and small business creates most of the jobs in the country. You may think of Microsoft as a typical corporate elephant, but it started out as a couple of computer nerds spotting an opportunity to sell a program called ?DOS? long before it made Bill Gates the richest man in the world.
We?ll start with business equipment. Businesses generally don?t get to deduct equipment they buy for their operations. They have to depreciate it over a specified period ranging from 3 years to 39 years depending on its useful life. But there?s a special provision called ?first-year expensing? that lets businesses deduct part or all of the equipment they buy. The theory here is that by giving buyers tax breaks, they?ll buy more, which grows the economy faster than without the tax breaks.
Last year?s economic stimulus package raised the first-year expensing limit to $250,000 for 2008. Last year?s law also created a 50% ?bonus depreciation? for most tangible property, like vehicles, machinery, and equipment.
The new act extends that limit for 2009 and 2010. This means continued opportunities for those of you looking to buy business equipment or even renovate business premises.
The new law includes a special break for businesses that lost money in 2008. Under regular law, when your business loses money, you get what?s called a ?net operating loss?. You can carry that loss back two years to get a refund of taxes you?ve already paid, or you can carry it forward 15 years to offset future profits.
Under the new law, if your business grosses less than $15 million and you lost money in 2008, you can carry the net operating loss back 5 years instead of the regular two.
Finally, the new law expands tax breaks for investing in small businesses. Under regular law, when you invest in businesses that qualify under a special section of the tax code, you can exclude up to half of your capital gains from your income when you sell. The new law expands the exclusion to 75% of your gain.
