If you're still pondering whether to release that PO for new computing hardware here’s some news that may help. There may be remaining tax savings available in 2008 that can mean real cash in your bank account today, and savings forward.
The 2008 U.S. Economic Stimulus legislation signed into law earlier this year was not just for individual citizens. Also provided were accelerated depreciation provisions that greatly benefit small businesses. Example uses for your business include the purchasing (and immediately expensing of) new capital hardware and software. But the equipment must be put into use by 12/31/2008!
How does the stimulus package work?
1. Businesses can expense up to $250,000 in property and equipment purchased in the 2008 tax year (the 179 Deduction), yielding real tax savings:
- Business results – tax savings effectively subsidize the purchase of new hardware and software to reap the benefits of virtualization and consolidation – including reduced operating costs and faster ROI.
2. Write-off capital acquisitions faster with two additional deductions:
- Special depreciation allowance allowing businesses to write off 50% of what you paid for property acquired and placed into service in 2008.
- In addition to the first 50% deduction, you can take a write-off on the normal first year depreciation for the remaining 50% of what you paid for the equipment in 2008. Given the depreciation rules, this results in 60% depreciation immediately.
Example investment:
Using $50,000 to invest in new server computing hardware, the financial impact would be $30,000 ($50k * 60%). In a 33% tax bracket that means $10,000 in cash savings immediately.
Then the benefits of virtualization kick-in which can be estimated at $3,500 per year in power savings, reduced IT management costs, and savings in office real-estate. And this doesn’t include value created through increased stability, uptime, and performance typical of virtualized IT environments.
Feel free to contact me at byron@kennedytechgroup.com for questions specific to your business situation.
To learn more about Kennedy Technology Group, please visit us at www.kennedytechgroup.com.
Sources and further reading on the 2008 Economic Stimulus Package:
U.S. Small Business administration - http://www.sba.gov/stimulus
Business Provisions of the Economic Stimulus Act of 2008 - http://www.irs.gov/newsroom/article/0,,id=183867,00.html
IRS To Issue Guidance on Special 50-Percent Depreciation Allowance -http://www.irs.gov/newsroom/article/0,,id=181364,00.html
2008 Economic Stimulus Act Provides Tax Benefits to Businesses -http://www.irs.gov/newsroom/article/0,,id=179227,00.html
Comments