Stimulus tax breaks: what's in it for your business

The "stimulus" bill passed by Congress last Friday has some tax breaks that will generate cash for those businesses fortunate (or unfortunate) enough to qualify. 

Estimated tax breaks.  If more than half of your income comes from a small business, your "protective" estimated tax payments might go from 100 percent or 110 percent of your 2008 tax to 90 percent, if you qualify.

Bonus depreciation and asset expensing.   The "Section 179 deduction" allows businesses to currently deduct the cost of some assets that would otherwise be capitalized and expensed over several years through depreciation deductions.  The bill extends the 2008 cap on the deduction, $250,000, through 2009.  It would otherwise have been limited to purchases of $113,000. 

The bill also extends the 200 percent "bonus depreciation" rules through 2009.  You may deduct half the cost of assets qualifying for bonus depreciation in the year of purchase; you depreciate the rest of the cost under the usual rules. Qualifying property is generally new depreciable business property other than real estate.

Five year Net Operating Loss Carryback.  If you are unfortunate enough to have had a really bad 2008 - bad enough that you end up with a net operating loss on your 2008 tax return - the new law may allow you to carry it back five years, rather than the normal two years, to get refunds of prior year taxes.  This will benefit those who either had a loss that exceeded combined 2006 and 2007 taxable income.  It will also help some taxpayers who also expect a 2009 NOL; they will be able to offset 2008 losses against 2003 - 2006 income that would otherwise have offset 2007 income; that will leave some 2007 income available for offset.

Unfortunately and stupidly, the five-year carryback only applies to 2008 losses; it looks like 2009 will be the big loss year for many more taxpayers.  The five-year carryback is limited to taxpayers whose gross receipts averaged $15 million or less during 2005-2007.  Congress decided not to let larger businesses get refunds of their taxes from the good years to keep their doors open and their people employed, in favor of taking that money to "create jobs."

The stimulus bill has some more narrowly-focused business provisions, including some "built-in gains tax" relief for some S corporations and some relief for those who have debts forgiven.  It also has the 2009 version of the "AMT patch," keeping many businesses out of alternative minimum tax for another year.  It also has a bunch of tax provisions that aren't strictly business-related, which you can read more about here, here and here.

None of this stuff is simple, unfortunately, so consult your own tax advisor before you do anything to secure one of these tax breaks.