The 'HIRE Act of 2010' officially extended the Section 179 Deduction increases made available in the 'Economic Stimulus Act of 2008' & 'American Recovery and Reinvestment Act of 2009' through December 31, 2010

Economic Stimulus Act of 2008 and Section 179

In order to address concerns regarding a slowing economy, President Bush asked Congress to come up with an Economic Stimulus Plan that would benefit both consumers and businesses, and Congress responded with a comprehensive economic stimulus package.

On February 13, 2008, President Bush signed H.R. 5140, otherwise known as the 'Economic Stimulus Act of 2008'. The Economic Stimulus Act immediately grabbed headlines because most Americans would receive a check for $600 from Uncle Sam.  While the Economic Stimulus Act was a boon for consumers, there were significant benefits in the Economic Stimulus Act for businesses as well.

In fact, Small Business benefited a great deal from the 'Economic Stimulus Act of 2008'. This is because the Section 179 Deduction limits were generously increased, and small businesses across the country reaped the rewards.

Extensions of the Stimulus Act for the 2009 and 2010 Tax Years
On February 17, 2009, President Obama signed the 'American Recovery and Reinvestment Act of 2009' extending the enhanced Section 179 Deduction limits for another year through the 2009 tax year-end.

On March 18, 2010, President Obama signed the 'HIRE Act of 2010' keeping the maximum Section 179 deduction at the increased level of $250,000 for qualifying equipment and software placed in service for tax year 2010.  Without the provision in the HIRE Act, the maximum Section 179 write-off would have fallen back to only $134,000 in 2010.

How your business could benefit from Stimulus Acts of 2008, 2009, 2010
The Section 179 Deduction was significantly enhanced by the 'Economic Stimulus Act of 2008', was extended an additional year by the 'American Recovery and Reinvestment Act of 2009', and finally extended one last year in 2010 by the 'HIRE Act of 2010' giving businesses an incentive to invest in themselves by purchasing or leasing new equipment.

The specific impact the Economic Stimulus Act has had on the Section 179 deduction is related to the dollar limits of the deduction. The previous dollar limits were a $125,000 limit on the deduction and the total amount of equipment purchased could not exceed $500,000. The Economic Stimulus Act raised these limits significantly. The new deduction limits became $250,000 on the deduction, and the total amount of equipment purchased could not exceed $800,000.

To recap the limits by tax year:

2007 Deduction Limit: $125,000
2008 Deduction Limit: $250,000

2009 Deduction Limit: $250,000

2010 Deduction Limit: $250,000

Deduction decreases dollar-for-dollar after totals reach the following:

2007 Total Amount of Equipment: $500,000

2008/2009/2010 Total Amount of Equipment: $800,000

 

Bonus Deduction

Another change that the Economic Stimulus Act of 2008 brought to Section 179 is it offered a one-time “bonus first year depreciation” of 50% on qualifying equipment. This was after the above deduction limit was reached.

In other words, if you bought enough equipment to exceed the $250,000 deduction, you could take a “bonus” 50% depreciation on the rest – this was in addition to normal depreciation (Section 179 deduction chart).

IMPORTANT> As of this writing, the bonus first year depreciation made available by the 2008 Stimulus Act has not been renewed for the 2010 tax year.

Everyone Benefits

Most small and medium-size businesses find these new dollar limits generous indeed. The Economic Stimulus Act helped consumers, and it also continues to significantly help most small businesses as well by lowering the cost of equipment that they need to purchase or lease to run their day-to-day operations. To see how much you could save in 2010, use this Section 179 tax calculator.

Act Now

As of this writing, the 'HIRE Act of 2010' has extended the one-year increase through the end of tax year 2010. Unless it is extended, the Section 179 Deduction phases out in 2011, so if you want to take advantage of the higher limits, you need to act before the end of this year.