What a Relief!
The much debated and finally passed economic stimulus package may mean quite a bit to your business. This year, tax analysts say the Job Creation and Worker Assistance Act of 2002 will provide $43 billion in tax breaks to businesses, much of which will go to small businesses.
A provision especially hailed by business owners allows companies to immediately deduct an additional 30 percent of the cost of most new equipment purchased during the next three years. To be eligible, the equipment must have been acquired after September 10, 2001 and before September 11, 2004.
"This is very favorable to business because it provides a 30 percent depreciation bonus," explains Thomas Ochsenschlager, a partner of accounting firm Grant Thornton in Washington, DC. Entrepreneurs can now use the extra depreciation deduction in addition to the small-business expensing election.
Another major tax benefit targets companies currently operating at a loss. The new law temporarily extends the period in which businesses can carry back losses to offset income tax liability from two to five years . To be eligible for the extended carry-back period, the losses must have taken place in tax years ending in 2001 and 2002. The new law also allows a company's net operating loss deduction to trim its alternative minimum taxable income up to 100 percent. In addition, the new statute extends for two years many popular tax credits and deductions that expired December 31, 2001, including the work opportunity tax credit and welfare-to-work tax credit.
Already filed your 2001 federal tax return? Not to worry. If you qualify for the new breaks, talk to your accountant about preparing an amended return.
Great Falls, Virginia, writer Joan Szabo has reported on tax issues for more than 14 years.
- Grant Thornton