Section 179 of the Stimulus Act

Tax code is about as dry as any topic can be, but in this article we’ll simplify and offer some quick explanations to some of the incentives Uncle Sam if offering businesses this year. Most of us are familiar with the 2008 Economic Stimulus Act of 2008 because those who qualified received checks from the government. What many are unfamiliar with was Section 179 which is a stimulus for businesses. It offers incentive for American business to make equipment upgrades and purchases.

In summary, Section 179 allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. This is essentially accelerated depreciation. Before the stimulus act, depreciation happened over 7 years. Each passing year you would deduct a fraction of the cost of your equipment from your gross income, thereby marginally reducing your taxes over time. Section 179 gives you all of that deduction from your gross income in one shot. The accelerated depreciation allowed by Section 179 of the 2008 Economic Stimulus Act can reduce the gross cost of equipment purchases by as much as 30%.

Example of Section 179 Tax Benefits (Courtesy of
Example of Section 179 Tax Benefits (Courtesy of

There are some limitations to Section 179. No more than $250,000 can be written off in 2008 and no more than $800,000 of equipment can be purchased in 2008 to qualify. However, in 2008, businesses that exceed the $250k deduction limit can take a bonus depreciation of 50% on the amount that exceeds the limit. And then also take normal depreciation on the rest.

This general info should help give you some information on Section 179. Tax code can be confusing and its important to understand these incredible incentives. In times of economic slowdown its vital to take advantage of every bit of savings we can. MSL recommends you consult your own financial adviser or CPA for advice.

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