Consumers aren’t the only ones encouraged to go shopping as a result of the federal government’s $150 billion stimulus package.
The Economic Stimulus Act of 2008 provides tax breaks worth an estimated $45 billion to businesses that purchase new equipment this year.
Unlike the uncertain outcome of giving individuals up to $600 each to spend as they please, the business tax breaks should create jobs, boosting the economy in the long term, experts say.
“By encouraging people to invest in machinery, equipment and depreciable assets, we know what they are going to do with it,” said Butch Shoup, head of the tax practice at accounting firm Clifton Gunderson in Denver.
Heavy-truck dealer Terry Frankland is notifying his customers about the enhanced tax benefits in the hopes they will buy a new rig.
“People are starting to respond. Our customer gets a heck of a break to go out and spend some money,” said Frankland, president of V&H Trucks, a Wisconsin company with a Brighton location.
Businesses can deduct up to $250,000 of assets known as Section 179 properties, up from the previous $128,000 write-off allowed. The deduction is reduced once equipment purchases exceed $800,000 and eliminated at $1,050,000.
But at that point, an even bigger benefit kicks in, Shoup said. Half the value of purchases above $1,050,000 can be written off as “bonus depreciation.”
The equipment must be new and placed in use in 2008 or the company’s current calendar year. Real estate and intangible assets such as trademarks are not covered.
Write-offs can be so large that they could swamp the income a company generates, and that requires careful tax planning, Shoup said.
“Clients are unbelieving,” Shoup said. “I am telling them this is a one-time opportunity.”
The new law doesn’t eliminate a $25,000 expense limit placed on purchases of sport utility vehicles.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
