Economic Stimulus: More than Just a Check

The odds are good that you’ve already spent the money you got from Uncle Sam as part of his economic stimulus package, but the party isn’t over yet. Buried in the stimulus package are some business incentives that you should be looking at, especially since you only have until the end of the year to take advantage of them. If you buy new medical equipment in 2008, for example, you can expense up to $250,000 of the cost upfront instead of taking a deduction based on depreciation. That’s almost double the $128,000 you were previously allowed. The deduction also applies to expenses for items like furniture and computers.

The stimulus package also contains a bonus depreciation provision, which would allow you to immediately depreciate 50% of the cost on any equipment bought in 2008 and still write off whatever depreciation is allowed under current tax rules. If, for example, you buy $100,000 worth of equipment subject to the 5-year depreciation rule, you can immediately depreciate half the cost, $50,000, as well as one-fifth of the other half, or $10,000, as regular depreciation. If you buy a car to use in your practice, there’s another benefit—an increase in the maximum depreciation allowed for vehicles used for business. For vehicles placed in service during 2008, you can depreciate up to $10,960, up from $2,960.

As with many tax breaks, there are some limitations. Some items can’t be expensed, and if you spend more than $800,000 on equipment, the $250,000 write-off begins to phase out. Before you go shopping, check out the details with your accountant.