Hey Guys,
Read the article below on the options for any new small business owners. Congress’ Bailout bill can really help as far as offering some great tax-incentives. Read on below:
ATTENTION small-business owners: The massive Emergency Economic Stabilization Act of 2008 (better-known as the Bailout Bill) includes a number of federal tax changes that could affect your business.
Here’s what you need to know:
New 15-Year Depreciation Break for Retail Space Improvements
A brand-new provision allows 15-year straight-line depreciation for qualified retail improvement property placed in service in 2009. This break covers real property improvements to the interior portion of a nonresidential building if: (1) that portion is open to the public and used in a retail business and (2) the improvement is placed in service more than three years after the building was put in use. However, the new 15-year depreciation break is not available for improvements related to:
* enlarging a building,
* elevators or escalators,
* structural components that benefit common areas, or
* the internal structural framework of the building.
Without the favorable 15-year rule, retail space improvements generally must be depreciated over 39 years. So this is a good deal if your business qualifies.
15-Year Depreciation Break for Leasehold Improvements and Restaurants
The new law extends the favorable 15-year straight-line depreciation privilege for qualified leasehold improvements and qualified restaurant building improvements for two more years, to cover improvements put to use in 2008 and 2009. In addition, the 15-year depreciation break will be available for qualified restaurant buildings themselves (as well as restaurant building improvements), for 2009.
Without the favorable 15-year rule, leasehold improvements, restaurant building improvements, and restaurant buildings generally must be depreciated over 39 years, which would mean higher taxable income (and higher taxes) for your business.
New Five-Year Depreciation Break for Farm Equipment
Most types of farming machinery and equipment must be depreciated over seven years. However, the new law includes a temporary rule that allows favorable five-year depreciation for qualifying property used in a farming business. However, the five-year depreciation break only applies to new (not used) assets put to use during 2009. It’s not available for grain bins, cotton ginning assets, or fencing and other land improvements.
New Tax-Free Employee Fringe Benefit for Bicycle Commuters
The bailout bill creates a brand-new tax-free fringe benefit for employees who commute to work on bikes. This favorable change is effective for tax years beginning in 2009 and beyond.
As the employer, you can give employees tax-free reimbursements to cover their reasonable expenses to buy, improve, repair or store bicycles regularly used for commuting to work at your business. However, reimbursements are limited to $20 for each month of bicycle commuting. So the maximum annual amount an employee can receive tax-free under this deal is limited to $240. Still, it’s a nice goodie that you can offer to employees who are interested, and you can write off the reimbursements on your business tax return.
New Tax Credit for Plug-In Electric Vehicles
The new law establishes a brand-new tax credit for plug-in electric drive motor vehicles. It applies to qualifying new (not used) vehicles that are purchased (not leased). The credit is available to both business taxpayers and individuals. To qualify, vehicles must be placed in service in tax years beginning after 2008, but those purchased after 2014 won’t qualify.
The credit is $2,500 for a vehicle powered by a traction battery with a capacity of 4 kilowatt hours. An additional credit of $417 is allowed for each additional kilowatt hour of battery capacity until the credit cap is reached. The cap is $7,500 for lighter vehicles, which is probably the only kind your business (or you personally) will be interested in buying. (For heavy vehicles with gross vehicle weight ratings in excess of 10,000 pounds, the caps range from $10,000 to $15,000.)
I must admit I don’t know how many vehicles are running around right now that would qualify for this credit. Not very many I bet. But more are coming. For example, the eagerly awaited Chevy Volt is scheduled to debut in 2010, and we might see some other qualifying vehicles before then. Stay tuned.
Tax Credit for Alternative Fuel Vehicle Refueling Equipment
This one sounds boring, but please keep reading because you might be surprised. The new law extends the business tax credit for up to 30% of the cost of installing non-hydrogen alternative fuel vehicle refueling equipment for one more year, to cover equipment placed in service through 2010. The credit for hydrogen refueling equipment was not extended, because it’s already allowed through 2014.
To illustrate why you might be interested, this credit can be claimed when a gas station or any business installs ethanol, compressed natural gas, or hydrogen refueling pumps (among other types of alternative-fuel refueling equipment) for business use. The new law adds electricity to the list of “clean burning fuels” for purposes of the credit. So the cost of installing equipment to recharge batteries in electric-powered cars will now qualify for the credit too. The annual per-location cap on the credit is $30,000.
Note: As an individual, you can claim a nonbusiness tax credit based on 30% of the cost of installing alternative fuel vehicle refueling equipment at your principal residence. However, the annual cap on the credit in this case is only $1,000.
Contractor Tax Credit for Building Energy-Efficient Homes
The new law extends the $2,000 per-home contractor tax credit for building new energy-efficient homes (including manufactured homes) for one more year, through 2009. The credit can also be claimed for substantially reconstructing and rehabilitating an existing home and making it more energy-efficient. Manufactured homes that don’t fully meet the energy-efficiency standards may qualify for a reduced $1,000 credit. For a home to qualify for this credit, it must be sold by Dec. 31, 2009, for use as a residence.
Deduction for Making Commercial Buildings Energy-Efficient
The new law extends the provision allowing deductions (instead of capitalization) for the cost of qualified energy-saving improvements to commercial buildings for five more years, to cover property placed in service through 2013. The maximum deduction under this provision is generally limited to $1.80 per square foot. In some circumstances, a reduced deduction of up to 60 cents per square foot is allowed.
FUTA Tax Surcharge
The Federal Unemployment Tax Act (FUTA) currently imposes a 6.2% tax rate on the first $7,000 of an employee’s annual wages. The 6.2% rate is comprised of a permanent 6% rate and a 0.2% temporary surtax. The Act extends the surtax through 2009. So the FUTA tax rate will continue to be 6.2% through the end of next year. So this is the unfavorable change I was talking about. As you can see, it’s no big deal.
thats great I think that these tax breaks will really help people out and we all need it