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Government Stimulus Bill

The bill almost doubles the value of the Section 179 expense perk, allowing businesses to deduct as much as $250,000 of qualified expenses in 2008, with the phase-out threshold for that perk rising to $800,000. The idea is the incentive will give business more of a reason to purchase equipment or finance it.

Before, the deduction was limited to $128,000 worth of expenses in 2008 and the phase-out was $510,000. Also, the stimulus package makes the business depreciation provision more valuable, allowing a company to depreciate an additional 50% of the cost of an asset bought in 2008.

It appears the stimulus is good for 2008 and the details on equipment may be the same as for current requirements. It will be of benefit to businesses in 2009.

Since most leases are capital leases, according to the Equipment Leasing and Finance Foundation study 88% are capital leases, there does not appear to be much tax effect for leasing and finance companies. Companies that can pass the depreciation to single investors may realize benefits. The main benefit is to give businesses incentive to purchase $250,000 or more in equipment to deduct the cost in one year rather than spread the cost by depreciation over time schedule.

SO IF SOMEONE IS LOOKING AT USED TELL THEM TO WAIT!
This new package should help win the new vs used debate.
THE STIMULUS PACKAGE IS FOR NEW PURCHASES.

2008 Tax Savings
For companies that purchase less than $800,000 a year on qualified Equipment

Example: Equipment Costing $350,000 is Leased with a $1.00 Purchase Option. Using Section 179 and assuming a 35% tax bracket, your net savings on the equipment would be:

Example:
Equipment Cost = $350,000.00
1st Year Write off: Section 179 $250,000.00 ($250,000 is maximum write-off)
50 % Bonus Depreciation:$50,000.00 ($350,000 – $250,000 = $100,000)
Standard Depreciation: $7,145.00 ($350,000 – $250,000 – $50,000 = $50,000 x 14.29% = $ *
Total 1st Year Deduction: $307,145.00($250,000 + $50,000 + $7,145 = $307,145.00)
Tax Savings Assuming Rate of 35%:$107,500.00($307,145.00 x .35 = $107,500.00)
1st Year Equipment Cost After Tax Savings: $ 242,500.00
*Depreciation calculated at regular 7 year schedule

*Check with your accountant to see how this bill directly effects your company