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DEPRECIATION CHANGES IN RECENT STIMULUS PACKAGE

Earlier this year, Congress passed a few tax law changes within the Economic Stimulus Package.  Included in this is a very valuable depreciation change that will only benefit clients who purchase fixed assets in 2008.

In general, the fixed asset must be eligible for MACRS depreciation and placed in service in its original use with the client after 12/31/07.  In other words, it must be new and not used property.  Leasehold improvements will not qualify for such treatment, unless the improvement is classified as a “qualified leasehold improvement.”

The bonus depreciation is similar to the rule we had in the past. A business can deduct up to 50% of the basis in qualifying assets placed in service during 2008 only.  In addition, the vehicle depreciation rules have also changed slightly.  Below are the first year depreciation amounts for automobiles and light trucks/vans.

Automobiles:
2008 - $10,960
2009 - $4,800
2010 - $2,850
2011 and thereafter - $1,775

Light Trucks/Vans:
2008 - $11,160
2009 - $5,100
2010 - $3,050
2011 and thereafter - $1,875

If your business is looking to purchase new assets this year, please let us know and we can estimate the impact on your profit for 2008.