Economic Stimulus Act Can Provide Big Tax Savings

Earlier this year, President Bush signed the Economic Stimulus Act, which temporarily reinstates the depreciation bonus and increases Sec. 179 expensing limits. This could result in potentially big tax savings for your quarry operation.

Here’s how it works: Companies that purchase new equipment in 2008 can depreciate 50 percent of the cost in the first year, plus the percentage of the remaining basis in the equipment that would ordinarily be depreciated under the Modified Accelerated Cost Recovery System (MACRS).

For example, a $100,000 piece of equipment with a five-year MACRS life would have a first-year depreciation under the Economic Stimulus Act of $60,000 (a $50,000 depreciation bonus plus 20 percent of the remaining $50,000 basis).

To be eligible, the equipment must be new and must be purchased and placed in service between Dec. 31, 2007, and Jan. 1, 2009.

The Economic Stimulus Act dramatically increased the expensing limits under Sec. 179 of the Internal Revenue Code for any taxable year beginning in 2008. For the 2008 tax year, companies can expense up to $250,000 as long as total purchases do not exceed $800,000. To qualify for Sec. 179, equipment does not have to be new.

Companies eligible for Sec. 179 can also combine it with the depreciation bonus for even bigger tax savings.

For more information, visit www.DepreciationBonus.org. As always, be sure to consult with your tax professional.