Stimulus Package Could Be Windfall For Small Businesses Able To Make Investments

The Portland Business Journal has a good breakdown of the tax breaks for businesses in the recently-enacted stimulus package:

These breaks can be a powerful incentive for business investment, especially when combined, said Bill Smith, director of the national tax office for CBIZ MHM.

Smith cites an example of a small business investing $500,000 in equipment that normally is depreciated over five years. The business could take the $250,000 Section 179 expensing limit and then apply 50 percent bonus depreciation. The business could then depreciate $25,000 of the remaining $125,000 of the investment this year. The end result: The business could write off $400,000 of the $500,000 investment this year, instead of having to wait to recover this money.

Of course, none of these benefits matter if the businesses can't make the investments in the first place. The bill does have one modest solution that applies only to businesses with under $15 million in annual revenue:

The economic stimulus package provides a solution, however, to businesses with less than $15 million in annual revenue. The new law allows these businesses to carry back net operating losses for five years, instead of the previous two-year limit. A business that currently is losing money could apply these losses to a previous profitable year and then claim a refund for taxes paid that year.