The taxman cometh in just a few short months, and though you probably won’t have to declare the pennies on your eyes, as George Harrison once advised, several key changes in tax laws are definitely worth knowing about in advance of April 15.
The taxman cometh in just a few short months, and though you probably won’t have to declare the pennies on your eyes, as George Harrison once advised, several key changes in tax laws are definitely worth knowing about in advance of April 15.
“There were so many tax acts this past year, so education is a big part of what we’ll be doing with our clients,” says Daniel Monaghan Jr., senior tax manager at the Portland accounting firm Perkins & Co.
Two major federal laws, the Economic Stimulus Act of 2008 and the Emergency Economic Stabilization Act, each came with several tax provisions that will impact 2008 returns.
The first increased the Section 179 deduction for new equipment put into service in 2008 from $125,000 to $250,000. The cap on equipment spending covered by the deduction was also raised for 2008 from $500,000 to $800,000.
Monaghan notes that businesses that don’t qualify for the Section 179 deduction are eligible for a 2008-only bonus depreciation, through which they can write off 50% of the cost of equipment and then depreciate the other 50%.
The second new law, aka “the bailout,” extended several business tax provisions that were set to expire. Among them, the depreciation timeline for qualified leasehold improvements made by, for instance, a tenant renting office space.
In the past, those improvements have been depreciated over 39 years, but that was temporarily changed for 2007 — and now extended through 2009 — to 15 years.
In addition, the bailout made changes that are in effect for the 2009 tax year, including extending a research and development tax credit and allowing employers to provide up to $240 to employees who commute by bike. It also eliminated restrictions so that more businesses can qualify for a 30% tax credit on solar power installations; in Oregon, businesses are also eligible for a credit of up to 50% of the cost of a solar project over five years.
This year also will bring a tax break to Portland businesses in the form of a reconfigured business license tax, which will now be paid at the end of each year instead of in advance.
As for what else 2009 — and the new Obama administration — may bring in terms of taxes, Monaghan says the new president’s campaign was heavy on tax reform, but until anything becomes law, there’s little point in speculating.
“We don’t trust anything until the president signs it,” he says.
JON BELL
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