The Economic Stimulus Act of 2008
They say you can count on two things: death and taxes
Expanding on that thought, when it comes to taxes, you can count on something else – when economic times get hard, the government will look to ease taxes to stimulate the economy (politicians know that we Americans can get rather feisty when the economy isn’t to our liking.)
So it was with great fanfare that the Economic Stimulus Act of 2008 (also known as the “$600 checks for everyone act”), was signed into law on Feb 13, 2008. The act was written by lawmakers to stimulate the current shaky economy. As already mentioned, the main focus of the act is the (up to) $600 checks that almost everyone will be receiving.
The requirements to get your rebate check are simple – you just need to file a tax return for 2007
Since an overwhelming majority of the population already does this, they need not do anything else – their check will simply appear sometime in the spring / early summer. But even those who don’t normally file a return should do such, as they are likely eligible for this rebate as well.
When you get your check will depend on your social security number – the lower the last two digits, the sooner you will get your check. For example, if your SS# ends in 00 to 09, your check will be mailed May 16th. If your SS# ends in 88-99, your check will be mailed in early July (note: those who chose direct deposit for any tax refunds will get a direct deposit instead of a check – they will also get theirs a bit sooner.)
This extra money could not come at a better time – rising gas and food prices have strained the wallets of many Americans, so, for once, it appears the government is actually lending a helping hand.
Not to leave businesses out, written into the Economic Stimulus Act of 200 are a few provisions that will be of great interest to businesses – provisions that will likely spur equipment purchasing decisions in 2008.
Big Changes to Section 179 (you know, the “Hummer” tax code!)
To put it briefly, the “business side” of the Economic Stimulus Act of 2008 largely seeks to enhance and expand Section 179, which is a section of the US tax code that allows businesses to deduct the full amount of certain equipment purchases during the tax year they were bought. People sometimes refer to Section 179 as the “Hummer” tax code, because Hummers were part of the qualifying equipment.
To give a good example of how Section 179 works, say a business purchases qualifying equipment for $100,000. Section 179 allows them to deduct the entire $100,000 for the current tax year. This gave businesses a big incentive to purchase new equipment.
The new act greatly raises the limits on how much can be bought and written off.
Previously, the “cap” on equipment purchase deductions was $128,000, and the total cost of equipment purchased could not exceed $510,000. The Economic Stimulus Act of 2008 has almost doubled the deduction cap, to $250,000, and raised the overall total cost to $800,000.
Twice as Nice
In other words, a business can write off the full purchase price of almost TWICE the amount of qualifying equipment during calendar year 2008 as it could in calendar year 2007. As of now, the act is for 2008 only – the equipment must be put into use between Dec 31, 2007 and Jan 1, 2009.
Another change that the Economic Stimulus Act of 2008 brings is it offers a one-time “bonus first year depreciation” of 50% on qualifying equipment. This is after the above deduction limit is reached.
Basically, the government wants businesses to spend more money on equipment during 2008, which will help stimulate the economy. This means “His and Her” Hummers for the business are not out of the question.
To show the effects this could have, let’s give an example:
As you can see, the financial benefit of the new legislation can be immense. In this example, $400,000 worth of qualifying equipment has a true cost of only $281,000. That’s a pretty big deal. It’s almost like getting some of the equipment for free. In fact, that’s exactly what it is. And if businesses finance this equipment over time, the bottom line can look even better.
Of course, the above example is hypothetical (although the math is spot on), but there’s no mistake that the Economic Stimulus Act of 2008 makes buying equipment that much easier. In effect, it makes buying more equipment NOW a smart business decision (especially since most businesses need new equipment at some point anyway – it just makes economic sense to buy it now.)
The government has offered a pretty big incentive – here’s hoping businesses respond with as much fervor as the population will once those $600 checks hit mailboxes (note to myself: steer clear of the mall.)