Just as none of our rulers in DC had the time to actually read the humongous 1,000 plus page spending bill before voting on it, none of us in the tax profession have time to slog through it. The first summary of the tax provisions I have come across is this five page one from ClientWhys.

Here are some of the provisions about which I have received the most questions over the past few months:

Vehicle 50% Bonus Depreciation – Some years ago, to prevent higher-income taxpayers from creating large tax writes-offs from expensive vehicles, Congress implemented the "Luxury Auto Limitations," which places a cap on first-year depreciation. The provision that extends the 50% first-year bonus depreciation to 2009 purchases (mentioned elsewhere in this article) also extends the increased dollar cap for new vehicles placed in service in 2009 by $8,000. The regular luxury auto depreciation caps for 2009 have not yet been announced by the IRS. For 2008, the regular cap was $2,960 but was increased to $10,960 when the 50% bonus depreciation was claimed. The 2009 amount will likely be similar.

Bonus Depreciation Extended - Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow, by permitting these businesses to immediately write-off 50% of the cost of depreciable property (e.g., equipment, tractors, wind turbines, solar panels, and computers) acquired in 2008 for use in the United States. This temporary provision has been extended through 2009.

Extension of Enhanced Small Business Expensing - In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. This is commonly referred to as the Sec. 179 deduction. Until the end of 2010, small business taxpayers are allowed to write-off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase out once capital expenditures exceed $500,000 (indexed for inflation). Last year, Congress temporarily increased the amount that small businesses could write-off for capital expenditures incurred in 2008 to $250,000, and increased the phase-out threshold for 2008 to $800,000. Those increased amounts have been extended to 2009.

I'm sure more such summaries will be published over the next few weeks. I will post links to those as I learn about them.

Labels: NewTaxLaws

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/17/2009 01:52:00 PM Send this post: