Tax Guru – Ker$tetter Letter

As I had been predicting, the economic stimulus program from our rulers in DC includes a very generous increase in the maximum Section 179 deduction.  All of the media attention regarding the stimulus bill has been on the tiny rebates and they have overlooked and ignored this very substantial tax break for small businesses. 

Here is how it is explained in the recent Spidell Flash E-mail:

On February 7, 2008 both the Senate and House of Representatives passed H.R. 5140, the Economic Stimulus Act of 2008 (the Act), which the President is expected to sign. The Act contains provisions pertaining to tax rebates and depreciation.

Increased §179 plus first year bonus depreciation

For tax years beginning in 2008, the Act increases the $128,000 §179 expensing limit to $250,000 and boosts the overall investment limit from $510,000 to $800,000.

In addition, the Act generally permits a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property acquired and placed in service after December 31, 2007, and before January 1, 2009.

Here is how Spidell explains the rebates for those not classified as evil rich by our DC rulers:

Based on 2007 returns, a rebate of up to $600 would go to single filers with AGI of $75,000 or less ($1,200 for married filing joint with AGI of $150,000 or less). In addition, parents would receive $300 rebates per child. Tax filers who do not owe income taxes but have at least $3,000 in qualifying income would get a $300 rebate. The rebates are phased out by 5% of income in excess of the threshold amounts.

The IRS is expected to start sending out checks in early May with all rebates completed by mid-summer, according to Treasury Secretary Henry Paulson.

Q:

Subject: Section 179 deduction for 2008

The information was last updated Oct 2007, I was just wondering if it still correct because there is different info on other sites?

Thanks

Regards,

A:

That info is correct.

We’re still waiting to see if the current debates over economic stimulus plans will include an additional increase in the maximum Section 179 deduction.  If it does, I will update my web site info.

Kerry Kerstetter

 

Q:

Subject: section 179

Hi,
Was just inquiring, as far as you know, is the deductions for the above section still in effect? There was speculaion about it being cancelled by congress this year.If not can it still be used?

A:

If anything will be changed about the Section 179 deduction this year, it will be to raise the maximum amount that can be claimed; not lower it.

If our rulers in DC are serious about attacking what they perceive as an upcoming economic recession, they will encourage more spending on equipment by small businesses by making Section 179 more generous. Historically, that has been done many more times as a means of kick-starting the economy than has the ridiculous rebate program that is receiving more of the publicity right now.

Be sure to work closely with your own personal professional tax advisor to keep abreast of how the Section 179 can be utilized most efficiently for your unique circumstances.

Kerry Kerstetter