Purchase Robotic Equipment and Save! Bonus Depreciation and Expense Deduction Tax Incentives Extended to 2009

The American Recovery and Reinvestment Act of 2009, signed into law in February, extends the Bonus Depreciation and Expense Deduction tax incentives passed in 2008. This business portion of the Stimulus Package provides incentives for businesses to purchase certain qualified property this year by allowing “bonus depreciation” and an increase in the small business expensing limitation.

Businesses interested in updating their manufacturing facilities with robotic automation can take advantage of the 2009 incentives. The accelerated depreciation provision gives companies a 50 percent bonus depreciation on new equipment placed in service during 2009 that would normally be depreciated over many years, which in effect allows companies to realize improved cash flow. All companies can take advantage of the bonus depreciation.

The increased deduction raises the limit on expenses that businesses can deduct from annual income – from $128,000 to $250,000 – with a total cap of $800,000.

Please read details from the IRS description of the 2008 Economic Stimulus Act below for more information.

2008 Economic Stimulus Act Provides Tax Benefits to Businesses

IR-2008-22, Feb. 21, 2008

WASHINGTON — In addition to providing stimulus payments to individuals, the Economic Stimulus Act of 2008 provides incentives to businesses. These incentives include a special 50-percent depreciation allowance for 2008 purchases and an increase in the small business expensing limitation for tax years beginning in 2008.

50-Percent Special Depreciation Allowancecatv

Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property over several years. It is an annual allowance for the wear and tear, deterioration or obsolescence of the property.

Under the new law, a taxpayer is entitled to depreciate 50 percent of the adjusted basis of certain qualified property during the year that the property is placed in service. This is similar to the special depreciation allowance was previously available for certain property placed in service generally before Jan. 1, 2005, often referred to as “bonus depreciation.” To qualify for the 50 percent special depreciation allowance under the new law, the property must be placed in service after Dec. 31, 2007, but generally before Jan. 1, 2009.

To reflect the new 50-percent special depreciation allowance, the IRS developed a new version of the depreciation and amortization form for fiscal year filers. The new form is designated as the 2007 Form 4562-FY and is available on this Web site.

Section 179 Expensing

In general, a qualifying taxpayer can elect to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property, after the relevant section in the Internal Revenue Code.

Under the new law, a qualifying business can expense up to $250,000 of section 179 property purchased by the taxpayer in a tax year beginning in 2008. Absent this legislation, the 2008 expensing limit for section 179 property would have been $128,000. The $250,000 amount provided under the new law is reduced if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $800,000.