Economic Stimulus Act: Tax Benefits for Businesses

While much has been written about the 2008 Economic Stimulus Act's stimulus payments to individuals, many small business owners may not be aware of provisions that can directly affect them. The stimulus package approved by Congress earlier this year provides incentives to businesses, including a special 50 percent depreciation allowance for 2008 purchases and an increase in the small business expensing limitation for tax years beginning in 2008.

"The economic stimulus package recently signed into law was a first step toward helping small businesses during this economic downturn by helping with the investment in new equipment, but we need to do more to make sure that small firms have access to the capital they need," said Sen. John Kerry (D-MA), chairman of the Committee on Small Business and Entrepreneurship, in a statement to Bookselling This Week. "Next week, I will hold a hearing to examine more short-term steps Washington can take to ease the credit crunch for small businesses, like small independent bookstores, including reducing loan fees and encouraging more banks to lend to America's entrepreneurs."

The Economic Stimulus Act seeks to encourage approximately $44 billion in business investment in 2008, and $7.5 billion in business investment over the next 10 years through two key components:

• Small Business Expensing. The plan doubles the amount that small businesses can immediately write off their taxes for capital investments made in 2008, from $125,000 to $250,000, for purchases of new equipment of up to $800,000 (from $500,000).
• Bonus Depreciation. It provides immediate tax relief for all businesses to invest in new plants and equipment by speeding up depreciation provisions, so that firms can write off an additional 50 percent for investments purchased in 2008.

For more details, visit the Internal Revenue Service website.