IRS Section 179 Expensing Limits Increases as part of the 2008 Business Stimulus Package.

IRS Section 179 Expensing Limits Increases as part of the 2008 Business Stimulus Package.

With the passing of the stimulus package, there is an increase in section 179 expensing limits as well as the return of the 50% bonus depreciation for 2008. Under the new provisions, businesses can expense (as opposed to depreciating) up to $250,000.00 of qualifying capital expenditures (generally equipment) placed into service in 2008. The expensing is limited when total assets acquired exceed a cost of $800,000.00.

The bonus depreciation provisions allow for expensing 50% of qualified assets placed in service after December 31, 2007 and before January 1, 2009. The placed in service date is extended for an additional year for certain property with a recovery period of ten years or longer as well as certain transportation and aircraft property.

Included with these depreciation provisions, is an increase in the “luxury auto” cap on first year depreciation to $8000.00. This was formerly $2060.00.

These provisions provide great incentives for businesses at the federal income tax level, but it is important to keep in mind that the states will need to determine if they will conform to the federal changes. Many states have chosen not to follow these increased limits in the past.

If you have questions as how any of these provisions affect you or your business, please consult a tax adviser.