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| February 14, 2008 |
Economic Stimulus Act of 2008
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February 14, 2008
By now, you’ve heard of the Economic Stimulus Act of 2008. Designed to boost the U.S. economy through business tax incentives and personal tax rebates, the package was approved by Congress and was signed into law yesterday by President Bush.
As CPAs and business advisors, it is our role to share this information with you and offer our assistance with analyzing the Act’s provisions as they apply to your individual business and personal situations. The following summary is designed to introduce the provisions of the Economic Stimulus Act.
We encourage you to contact your Account Partner or Manager for a more in-depth conversation. Additional information on the Act is also available at our website, www.applegrowth.com.
Improved Section 179 Expensing
The first business tax incentive aims to encourage investment in new equipment this year. The Act increases the Section 179 limit for initial-year expensing of new asset purchases to $250,000 from $128,000. The overall investment limit is increased to $800,000 from $510,000. With these changes, most small businesses, and even some middle market companies with moderate capital equipment needs, can get a full tax deduction for the cost of assets purchased in 2008, thereby reducing their effective cost for the assets.
Bonus Depreciation Returns
This provision offers a special allowance for certain property, generally placed in service in 2008. For eligible property, the special depreciation amount is equal to 50% of the cost of the asset. Qualifying property includes: tangible property with a recovery period of 20 years or less, purchased computer software, water utility property, and qualified leasehold improvement property.
Because both the Section 179 limit increase and the 50% bonus depreciation allowance can provide large 2008 deductions, you may want to accelerate any planned, major asset purchases into this year.
On the Personal Side, Recovery Rebates
To encourage personal spending, eligible individuals will begin receiving tax rebate checks soon after the April 15th tax filing deadline. The amount of the rebate will be either $600 ($1,200 for joint filers) or the taxpayer’s 2007 income tax liability, whichever is less. Rebates bottom out at $300, even if tax liability is less than $300 ($600 filing jointly). In addition, individuals with dependent children receive an additional $300 per qualifying child.
The rebate begins to phase out when Adjusted Gross Income exceeds $75,000 ($150,000 for joint filers). You should be aware that the rebate cannot offset taxes owed on your 2007 tax return, and extending your 2007 tax return will delay the refund.
The staff at Apple Growth Partners is well versed on the Act and will help you take appropriate action to maximize these taxpayer-friendly provisions as they apply to your own business and personal circumstances. Just give us a call or send an email.
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