The American Reinvestment and Recovery Act (ARRA) is chock-full of spending and other provisions designed to stimulate our sagging economy, including some important tax breaks for small and midsized businesses (SMBs). We’ve all heard a lot about the emotionally-appealing aspects of ARRA such as job creation and infrastructure spending, but the tax breaks for SMBs have been less widely publicized.
Increased Section 179 Accelerated Depreciation for 2009 – ARRA increases the capital investment limit that a company can claim under IRC Section 179 to $250,000 during tax year 2009 (previous limit of $25,000). Learn more about IRC Section 179 here.
A 50% Bonus Accelerated Depreciation for 2009 – ARRA allows companies with capital investment levels that exceed the $250,000 Section 179 limit to claim an extra 50% first-year
“Bonus” depreciation for the excess amount.
Standard Depreciation Still Applies – After application of the Section 179 and Bonus depreciation, any remaing investment amount can still be expensed under normal depreciation schedules using the Modified Accelerated Cost Recovery System (MACRS) schedules published by the IRS.
Eligible Capital Investments – Among other capital investments, these tax benefits apply to SMBs’ purchase of hardware and software (mainly OTS software that will not be extensivlely customized or configured). For guidance on what hardware and software qualify, review IRS Publication 946.
What This Means – I’m certainly no tax expert, but what I think all this means is that 2009 is a great year for SMBs to make capital investments, including investments in software and hardware.
NOTE: The foregoing is presented for informational purposes only and should not be interpreted as tax advice or opinion. You should consult your tax advisor to determine whether any of the tax benefits cited above might apply to you and under what specific circumstances.