Economic Stimulus Package Includes Special Depreciation Allowance for Certain Property

By William F. Becker, Cherry Bekaert & Holland, L.L.P. (CB&H)
Email: bbecker@cbh.com

In addition to the much publicized tax rebates scheduled to begin going out to individual taxpayers next month, the Economic Stimulus Package Act of 2008 (the Act) includes a few provisions geared to help businesses by enhancing expense allowances and expanding bonus depreciation.

Signed into law by President Bush on February 13, 2008, the Act significantly increases the amount eligible to be expensed under Sec. 179 to a maximum of $250,000, and increases the phaseout threshold to $800,000 for property purchased and placed into service in the 2008 tax year.

The provision for temporary bonus depreciation allows qualifying taxpayers a first-year depreciation deduction equal to 50 percent of the adjusted basis of qualified property, which includes:

• modified accelerated cost recovery system (MACRS) property with a depreciable life of 20 years or less;
• water utility property;
• off-the-shelf computer software (not covered by IRC §197); and
• qualified leasehold properties.

Generally, taxpayers must enter into purchase contracts and place the property into service during the 2008 tax year. For certain property, the placed-in-service date can be extended through 2009.

The Act provides a considerable economic allowance for both individuals and businesses. To maximize tax savings, expert tax planning is essential. Contact your local CB&H tax professional today to ensure that you and your business receive the maximum possible benefit of these provisions.

Bill is a Partner with CB&H and a member of the CB&H Real Estate & Construction Industry Group.