BiggerPockets

Business Tax Breaks – Use Them or Lose Them!

Thursday, April 02

A recent report issued by the Joint Committee on Taxation included a list of business tax breaks that will be expiring at the end of 2009, barring any additional extensions by Congress.  Many of the deductions have been previously extended on a year-by-year basis, including the recently enacted American Recovery and Reinvestment Act of 2009.   While some of these provisions may ultimately be extended, business clients are encouraged to review the expiring provisions.  Where it makes good business sense, take action now to prevent losing out on the tax breaks if they are not extended.

• Additional first-year 50% bonus depreciation for qualified property - Qualified property is allowed a 50% depreciation (bonus depreciation) in the year that the property is placed in service (with corresponding reductions in basis and reductions of the regular depreciation deductions otherwise allowed in the placed-in-service year and in later years).  In addition, an $8,000 increase in the first-year depreciation limit for passenger automobiles that are qualified property is also extended through 2009.  (Certain aircraft and long-production-period property can continue to be placed in service through 2010.)

• Increased Sec. 179 expensing election - The increased expensing election up to $250,000 (with an $800,000 investment ceiling limit) is extended through 2009. Taxpayers can elect to deduct the cost of any section 179 property, generally equipment, placed in service during the tax year as an expense which is not chargeable to a capital account.  (For 2010, without Congressional action, expensing will be limited to $125,000 with a $500,000 investment ceiling limit (both figures indexed for inflation)).

• Faster depreciation for farm machinery - Five-year depreciation for farming business machinery and equipment. 

• Fifteen-year cost recovery for leasehold improvements - Fifteen-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements.  

• Incremental research credit - A taxpayer is generally allowed a research credit of 20% of the amount by which the taxpayer's qualified research expenses exceed a specific base amount (unless the taxpayer elects the alternative simplified credit computation).

• Accelerate AMT and research credits - Election to accelerate AMT and research credits in lieu of additional first-year depreciation.

Please call this office if you have questions about how these tax breaks can be applied to your business. This and other great articles can be found in our April 2009 Newsletter. If you haven't signed up you can do so by clinking here Sign Me Up for The Anderson Monthly Newsletter.

Posted by Clint Coons, asset protection attorney, Seattle, Washington 

Define Tax Increase

Wednesday, April 01

We are all familiar with the old saying "there are no guarantees in this life other than death and taxes." For those individuals who pass away in 2010 the guarantee was death but not estate taxes. Now I doubt anyone is planning around this one time tax break but if you are taking note, this may not be the case anymore. Now that the Obama administration is scrambling to come up with ways to pay for their spending spree that has caused many "I never met a spending bill I didn't like" politicians to take pause, some guarantees are falling victim to the dreaded "find me if you can" footnote buried in budgets. Recently Lawrence Summers, President Obama's chief economic adviser, declared that "Let's be very clear: There are no, no tax increases this year. There are no, no tax increases next year." I guess its a matter of semantics but the question we should be asking of the President is how does his administration define a tax increase? Politicians love the game of hide the ball and in the case of the recent budget proposal this is exactly what they have done. The President's budget calls for the largest increase in the death tax in U.S. history in 2010. The Wall Street Journal editorial: Night of the Living Death Tax; Obama's Budget Quietly Resurrects It in 2010 details how the announcement of this tax increase is buried in footnote 1 on page 127 of the President's budget. That note reads: "The estate tax is maintained at its 2009 parameters." This means the death tax won't fall to zero next year as scheduled under current law, but estates will be taxed instead at up to 45%, with an exemption level of $3.5 million (or $7 million for a couple). Better not plan on dying next year after all. ...

What is particular distressing to me is the lack of frankness by politicians especially when it impacts our financial future. I know for the readers of this post that death is not something you are contemplating next year but it is the act of stripping from the code a tax break that will benefit some unfortunate to pass away next year without full and open disclosure. If you want to make a case for eliminating this tax break then be forthright with the American public and do not hide your true intentions in a foot note on page 127 of a budget. Some may not see the immediate impact of this but by raising the estate tax many family owned businesses will be impacted and forced to close in order to pay the estate tax. Ask yourself this-- what other tax deductions will this administration take away while making us believe they are not increasing our tax burden. I guess this is more of the "fuzzy math" politicians like to talk about not understanding when secretly they have it mastered.

Posted by Clint Coons, asset protection attorney, Seattle, Washington