The opportunity that Section 179 legislation (United States Internal Revenue Code 26 U.S.C. 179) offers businesses to spur their growth and expansion is unequaled in anything our Congress has passed in the last few decades.

Earlier this year, President Bush signed a new economic stimulus package offering even greater substantial tax savings and incentives for businesses. The Economic Stimulus Act of 2008 provides for greatly increased Section 179 depreciation allowances. Simply put, businesses placing less than $800,000 of equipment into service in 2008 will be able to immediately deduct up to $250,000 of its investment this year.

This 2008 legislation offers incentives to spur business investment. Industry insiders estimate it has the potential to save businesses approximately $50 billion in near-term taxes. The savings will come through a temporary change to the tax code that will allow American businesses that lease or buy new equipment this year to deduct an additional 50 percent of the cost of their investment in 2008. The legislation essentially doubles Section 179 from a qualification of less than $400K in equipment acquired in the year to $800K. This could be encouraging to businesses considering expanding or adding new jobs, because buying or leasing equipment, upgrading software, and adding tangible property could dramatically lower their tax bill, freeing up capital.

The legislation also increases expensing for small businesses. To illustrate, a business placing up to $800,000 of equipment into service this year would be able to immediately deduct up to $250,000. Generally, the types of business equipment that qualify for this expensing election are the same kind that qualified for the now-defunct Investment Tax Credit. Most business essentials qualify. Permanent structures do not. Business vehicles with a gross vehicle weight over 6,000 pounds qualify for the full Sec. 179, while lighter vehicles have a much lower dollar limit.

One of the most common questions is whether the Section 179 expensing election is only available for the purchase of brand new assets, or whether used equipment qualifies. The answer: the asset just has to be new to the business. Owners can claim the deduction for items purchased from anyone other than themselves, or an entity controlled by them, such as a closely held corporation. For businesses that are sole proprietorships, LLCs, partnerships or S corporations, the savings will depend on the individual’s tax rate. For a regular (C) corporation, the savings depend on the corporation's rate.