Unpacking the Stimulus Package: Stimulus Tax Breaks for Small Businesses



Unpacking the Stimulus Package, Vol. 3

The Stimulus Package created, extended or expanded several business tax deductions and credits to help small businesses struggling as a result of the economic downturn.  As some of these tax breaks are only available this year, companies have just a few months to take action.  Here are some of the key provisions:

  • If your business had a net operating loss (NOL) in 2008, you can carry the loss back over five years instead of the usual two years. This means you can get a refund of taxes you paid in prior years by submitting an Application for Tentative Refund.  The IRS will generally process these in ninety days.
  • You can deduct up to $250,000 worth of new and used machinery, equipment, vehicles, furniture and other qualifying property that your small business purchases during 2008 and 2009.  Without the new law, the limit of this Section 179 deduction would have dropped to $133,000.  This deduction can be claimed on your 2009 tax return on Form 4562.
  • In addition to the $250,000 Section 179 deduction, your business can deduct 50% of the remaining cost of most new (not used) assets that were purchased Jan 1, 2008 through Dec 31, 2009.  This is referred to as “bonus depreciation”, and can be claimed on your 2009 tax return.
  • The new bonus depreciation also increases the first-year depreciation deduction of new vehicles for your business by $8,000.  The increase does not apply to large SUVs and pickups.  For new cars, the estimated maximum first-year depreciation deduction for 2009 is now $10,960, and the estimated maximum first-year deduction for light trucks is $11,060.
  • Finally, many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations.  If your total income is less than $500,000 and 50% of it is from a small business, you only have to pay 90% of your estimated taxes in 2009.

Click here for step-by-step instructions on how to take advantage of each of these tax breaks.

Brooks Rainey Pearson is a dual degree student at UNC working toward a law degree as well as a master's degree in City and Regional Planning. Brooks graduated from UNC in 1999 with a bachelor's degree in Anthropology and spent six years in the Outer Banks where she owned and operated three yoga...
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