Tax Tips for Businesses

Special depreciation write-offs

Sec. 179 deduction has been extended for 2009. Sec. 179 allows immediate write-off of the cost of eligible business assets up to $250,000. To get the full sec. 179 deduction, the cost of 2009 purchases cannot exceed $800,000. Sec. 179 expense is fully phased out if purchases exceed $1,050,000. A special $25,000 limit still applies to SUVs. Sec. 179 applies to new and used assets.

The popular 50% bonus depreciation has also been extended for 2009, which allows immediate write-off of 50% of the cost of the eligible new business assets. There is no limits on the cost of assets purchased, but the assets must be brand new.

Net Operating Losses

The 2009 tax law extended the normal 2 year carryback period for the 2009 net operating losses to 3, 4, or 5 years back. Unlike, extended carryback of small business losses that was allowable for taxpayers with gross receipts of $15 million or less, any taxpayer can elect the extended carryback period under the 2009 tax law. The law also removed the gross receipts limit for 2008 losses allowing large businesses to utilize the extended carryback period for 2008 losses.

The new law requires the taxpayers to choose one year, 2008 or 2009, for which to apply the extended carryback period. However, the taxpayers who carried back their 2008 losses under the small business losses provision can still utilize the extended carryback for the 2009 net operating losses.

Work Opportunity Tax Credit

If you employ a member of certain “targeted group”, you can claim a tax credit for wages paid to those individuals. The maximum credit is $2,400 per employee. The targeted group has been expanded to include unemployed veterans and disconnected youths. Disconnected youths includes individual’s age 16 – 24 who are not regularly attending school and who are not readily employable because they lack a sufficient number of skills.

Business Owners’ Estate Planning

It is an ideal time to do estate planning with interest rates and real estate values being so low. Use this opportunity to set up various estate planning entities and transfer shares in closely held businesses or other assets while the appraisals are at a low point.