Small businesses could see more relief
Small business owners may soon see additional government help.
In an effort to continue help provided to small business suffering in the declining economic situation, Congressman Bobby Bright D-Montgomery sponsored a bill that would help extend tax breaks for capital expenses that expired at the end of 2008.
H.R. 361, allows businesses to deduct a greater amount of certain capital expenses in 2009 and also would provide an additional bonus depreciation in the first year those expenses occur.
“Our small businesses are suffering in this economic climate and they need all the help they can get,” Bright said.
“This is a common sense bill that will extend tax breaks that small businesses received in 2008. H.R. 361 will give small businesses added incentive to expand and create jobs even as our economy is in a recession. I am urging my colleagues and the administration to include this provision as part of any economic recovery measure,” he said.
If passed, H.R. 361 would amend Section 179 of Internal Revenue Code of 1986.
The current law allows businesses to deduct up to $125,000 for certain capital expenses in a given year.
Section 179 was amended in the last Congress to allow for deductions of up to $250,000 for capital expenses that occurred in tax year 2008, but H.R. 361 extends the 2008 changes to the 2009 tax year.
H.R. 361 would also extend a one-time 50 percent bonus depreciation rate for total yearly purchases that exceed $250,000.
For example, if a small business spends $400,000 on business equipment, it will be allotted a $250,000 first year deduction, according to figures released by Lewis Lowe, communications director for Bright.
Plus a bonus first year depreciation rate, which would total $75,000, and add the normal first year depreciation of $5,000 the total first year deduction would total $340,000.
The business would have a total savings of $119,000, assuming the tax rate is 35 percent.
With all the deductions, the actual equipment cost to the small business would top off at around $281,000.
According to Pike County Economic Development Corp. President Marsha Gaylard, small businesses need all the help they can get.
Gaylard said PC-EDC has supported helping small businesses for a long time, but there is not a lot of help available for small businesses.
“Small businesses have been the backbone of America and they will be the engine that jump starts our struggling economy,” Bright said.
Gaylard agrees with Bright that small businesses are the backbone of America and said that 80 percent of all new jobs come from existing businesses.
“This bill is a step in the right direction towards helping our small businesses expand and create jobs,” he added.