A2X Consulting

In order to help you better identify the benefits for your company offered in the Stimulus Package, we’ve prepared the following summary. Please feel free contact us with any questions!

1. Crediting a five year verses two year look-back period for business losses on taxes.

This applies to companies making less than $15 million in annual sales. If your company lost money in 2008, but paid taxes on profits sometime in the past five years, you can apply last year’s loss to prior year taxes and potentially get a refund on the taxes you paid in the past.

2. New equipment expensing limit.

Small businesses can immediately expense new equipment or machinery. In 2009, the maximum deduction will be $250,000 from $125,000 in 2008 – the limit on expenses that small businesses can deduct from annual income. This applies only to small business owners who invest less than $800,000 in their business this year.

3. New investment bonus depreciation.

The economic stimulus package provides for a 50% bonus depreciation for certain investments in business. This means a business can take an immediate deduction of 50% of the investment, rather than deducting the value over a number of years. For example, a small business investing $500,000 in equipment typically depreciates over five years. The business could take the $250,000 Section 179 expensing limit and then apply 50% bonus depreciation. The business could then depreciate $25,000 of the remaining $125,000 of the investment this year. The end result: The business could write off $400,000 of the $500,000 investment this year, instead of having to wait to recover this money.

Unlike expensing, the bonus depreciation deduction would apply to investments that exceed the $800,000 limit. These investments include purchase of qualified tangible assets that range from computers to manufacturing equipment, but this does not apply to real estate.

4. Tax credit for each employee hired.

There will be a tax credit of $2,400 per worker for hiring two classes of qualifying workers. The existing Work Opportunity Tax Credit lets businesses claim a tax credit for 40% of the first $6,000 in wages paid to a worker who falls into a qualifying “target group” of traditionally disadvantaged workers. Workers who fall into the target group are:

1. Veterans who left the military within the past five years and collected unemployment for at least four weeks before being hired.
2. Or workers between the ages of 16 and 25 who haven’t attended school or had regular employment in the past six months.

5. Additional funding for the Small Business Administration.

• The Small Business Administration (SBA) will temporarily guarantee 100% of loans of up to $35,000 issued by banks to small businesses that are struggling to make payments on existing debt.
• The SBA will pay the interest on the loan, and small businesses will have a year before they have to start repaying it.
• The SBA is also authorized to guarantee up to 90% of 7(a) loans, except for loans made through the SBA Express program, which will remain at 50%. (The current guarantee limits are 75% for loans above $150,000 and 85% for smaller loans.)

Source:

1. With Stimulus Package, the Big Winner Could Be Small Business
2. Stimulus Package Includes Incentives For Small Business
3. The Stimulus’ Key Small Business Tax Provisions
4. Stimulus package includes loan guarantees for small businesses
5. Stimulus Package Could Be Windfall For Small Businesses Able To Make Investments
6. Stimulus: What’s in it for small biz?