ATTENTION SMALL-BUSINESS OWNERS it’s not too late to make some smart moves and slash your business’ 2009 taxes. To start with, some soon-to-expire tax breaks are too good to ignore if your operation is healthy enough to need and be able to pay for equipment and software. And there’s more. Here’s my list of the best year-end tax-saving moves.
1. Buy a Heavy SUV
While buying a big SUV may not be politically correct, the fact is these vehicles are very useful if you need to haul people and stuff around. They also have a big tax advantage for businesses. Specifically, new and pre-owned “heavy” SUVs used over 50% for business qualify for a first-year Section 179 depreciation write-off of $25,000. You then depreciate the rest of the SUV’s cost using the general rules, which include 50% first-year bonus depreciation for new (not used) SUVs. (I’ll tell you more about bonus depreciation in Section 3.)
To collect the $25,000 first-year deduction, you must buy an SUV with a manufacturer’s gross vehicle weight rating (GVWR) above 6,000 pounds. Only these heavyweights qualify for the privilege. First-year depreciation deductions for lighter SUVs, passenger cars and light trucks are much skimpier. You can usually find a vehicle’s GVWR specification on a label on the inside edge of the driver’s side door where the hinges meet the frame.
Example: Say your small business uses the calendar year for tax purposes. You buy a new $65,000 Cadillac Escalade and use it 100% for business between now and Dec. 31. On your 2009 business tax return or form, you can claim the $25,000 Section 179 deduction. Then you can write off another $20,000 under the 50% first-year bonus depreciation break explained in Section 3 [($65,000 – $25,000) x 0.5 = $20,000]. Finally, you can generally write off another $4,000 under the normal depreciation rules [($65,000 – $25,000 -$20,000) x 0.2 = $4,000]. Your first-year depreciation deductions add up to a whopping $49,000.
2. Buy Other Equipment, Software and Vehicles
There’s a much larger first-year Section 179 depreciation deduction for things that are not SUVs. The write-off – a whopping $250,000 — is available for the cost of most new and used items of business equipment and software.
That includes computer systems, office furniture, machinery, and (as I said) software that is put to use during tax years beginning in 2009 (which means calendar-year 2009 if your business uses the calendar year for taxes, as most do).
The $250,000 Section 179 deduction privilege is also available for heavy pickups and vans (meaning those with GVWRs above 6,000 pounds) that are not classified as SUVs under the tax law. These include the following:
* Pickups with a cargo area that is at least six feet in interior length. Many pickups with full-size cargo beds will meet this description (but pickups with shorter beds will fail this test and be classified as SUVs).
* Closed load-carrying vehicles with no seating behind the driver’s seat and no body section protruding more than 30 inches ahead of the leading edge of the windshield. Delivery vans will qualify.