Just this week, congress passed a job-creation / tax cuts bill that’s aimed at rewarding businesses who hire new people. Called The Hiring Incentives to Restore Employment Act (or HIRE – clever, huh?), it seeks to give tax breaks (in the form of a social security tax exemption) to businesses that hire a previously unemployed (for 60 days) person.

Furthermore, the HIRE Act will provide a $1,000 tax credit (to be taken in 2011) for every new employee retained for 52 weeks. This is a good thing – maybe this will help a few out of work people get jobs.

But to me, the biggest news is tacked onto this bill was our old friend Section 179. This new HIRE Act keeps Section 179 around for at least another year. And even better, the “higher limits” that were first instituted two years ago were kept. This means businesses may elect to write-off up to $250,000 of certain capital expenditures (generally meaning equipment purchased) in 2010. So instead of depreciating a piece of purchased equipment over time, the entire purchase price can be written off in the first year. Nice.

This write-off is subject to a phase-out once these expenditures exceed $800,000. But still, this is BIG BIG news for businesses. And it’s big news for me, because when a business combines equipment financing (and equipment leasing) with Section 179, the benefits are profound. In many instances, a company could actually write off MORE than the first year’s finance payments total, making leasing equipment a profitable venture for the fiscal year. Again – nice!

Anyway, now you know – Section 179 is back. So if you were thinking about buying new equipment, 2010 is your year!

In fact, I would wager that if new (or even used) equipment is something your business can use, Section 179 might make a significant impact on your bottom line this year. This is because you can deduct the full purchase price of the equipment (up to the limits) THIS tax year. And if you finance (or lease) the equipment, you could actually deduct more than you’ll be paying out this year, making buying new equipment a profitable venture for this year’s numbers.

I mentioned the economy is getting better – that’s been evident for some time. This means there’s a certain amount of additional confidence that all of us have – yes, it looks like the apocalypse was kept at bay, and we’re all still going to be here next year (ok, that sounds dramatic, but wow, at certain times, the news made it seem like the country would just cease to exist at some point…. What I’m saying is it got a little silly.) So financing equipment is something you may want to take a look at.

Here’s another reason to be excited about Section 179 right now: we don’t know what’s going to happen to it next year. President Bush made the limits higher in 2008, and President Obama kept those limits for 2009 (currently a $250,000 max deduction on $800,000 total equipment purchasing). But what happens in 2010? We simply don’t know. Will the same limits be kept? I personally hope so, but there’s no guarantee. Look at it this way – Section 179 is very popular with businesses, but some (still) see it as “the Hummer tax loophole”. So who knows what will happen?

But in the meantime, you have a few weeks left in 2009 to take advantage of this very generous tax code. I know I talk up Section 179 a lot here, but that’s because it’s really a great thing for businesses, especially when you combine it with equipment financing and equipment leasing.

Take a look at your calendar, and then take a look at your balance sheet… There’s still time to make it look even better.

Anyway, I was working as a clerk in a large office supply store. It was New Year’s Eve day, and I was scheduled to work. I was pretty giddy that day, because I was young and carefree, and New Year’s Eve is THE holiday for the young and carefree. We were also closing early that day (4pm, I think), and there was a certain cashier at register 3 that I was taking to the big party that night… oh yes, I was going to ring in the New Year with style.

I also anticipated a slow day – I mean, who the heck shops for office supplies on New Year’s Eve? My co-workers who worked last New Year’s Eve said different – they said it would be busy. I scoffed, but then saw the crowd that was building at the door right before opening. It puzzled me – listen, people line up at the opening of Disneyworld, not an office supply store.

But line-up they did, and for the next seven hours, it was bedlam. People were popping out of the woodwork to buy office supplies. And I’m talking big (and heavy) stuff – the all-in-one fax/copiers, computers, office furniture, etc. It was one of the busiest days I ever worked.

Finally, about 3pm, I asked one of the customers “what the heck is going on?”  He replied that there was this tax code that said that if a business bought (and put into use) equipment before the end of the year, they could deduct the entire purchase price. So EVERY business in town made sure they took advantage before the end of the year. And since this was the holiday season, it always gets put off until the last minute. Hence, poor Fletch lugging copiers down from the top shelf at 3:59pm…

So we close at 4pm, and end up turning people away. The day is over. And I’m exhausted – I mean, I’m pooped.

Now, you probably expect me to say something like I fell asleep on my date, but I remind you that I was young and carefree. I got the second wind that all young people can call up on demand, and we had a wonderful time. So wonderful, in fact, that I forgot the busy day and such, and it wasn’t until many years later, sitting at the desk that I now occupy, that I finally understood what the big hoopla was all about.

The end of the year is coming soon – don’t wait until the last second the take advantage of section 179. Your friendly equipment financing person (me!) will thank you, and so will some poor office supply store clerk.

See, usually when I write about something like this, it’s about the tax advantages of leasing equipment, or maybe about leasing tax write offs, or some other issue about taxes and leasing. But not this time – this is a little more light-hearted in tone.

Ok, I get news alerts e-mailed to me on equipment financing and equipment leasing stuff… so whenever there’s a story that mentions equipment leasing or the like, I get it. Hey, what can I say… I like reading about this stuff. Usually, it’s all pretty mundane news – so and so announced the continuation of such and such program, making capital lease expenditures more advantageous to the… ok, I’ll stop before I put you to sleep.

But one I got recently made me smile. It seems a chiropractor in Georgia (the article mentioned the name, but I won’t here, as there’s no need to further publicize the guy) was sentenced to two years in jail for failure to pay taxes. Turns out, he was funneling money to dummy companies. They gave four examples of companies in the story, and you know what three of them were? They were leasing companies – “Chiro Equipment Leasing,” “Quantum Office Equipment Leasing,” and “World Travel Leasing”.

I found that pretty amusing, to be honest. On one hand, at first, I was slightly put off, thinking “jeez, why leasing… why is equipment leasing seen as a good place to “hide” money?” I guess I really had no reason to think negatively about it, but I’m proud to be in equipment leasing – and to find that someone used it as a front just gave me pause.

But then I thought about it some more, and it made sense to me. Because hey, leasing chiropractic equipment is indeed a legitimate business expense for a chiropractor, right? In fact, “equipment leasing” in general is pretty legitimate looking for any business. And, as all of my readers know, with Section 179 and such, there are definite tax advantages to leasing equipment. So I guess that he chose “equipment leasing” to make things look on the up and up must mean equipment leasing IS seen in a positive light.

But do me a favor everyone… pay the proper taxes, regardless of your business. And if you MUST fake it and hide money, do what everyone else does – file it under “entertainment expenses”.

Increased Section 179 limits expected to be extended thru 12-31-2009

The increased benefit of Section 179 Deductions enacted in last year’s Stimulus Act appears to be safely extended through this year’s tax year-end. The official title of the bill in Congress is American Recovery and Reinvestment Act of 2009 and the number of the bill is H.R.1 (the Senate’s version will be S.1.) Section 179 is specifically addressed on page 271, line 7 as follows:

SEC. 1402. TEMPORARY INCREASE IN LIMITATIONS ON EXPENSING OF CERTAIN DEPRECIABLE BUSINESS ASSETS. (a) IN GENERAL. – Paragraph (7) of section 179(b) is amended –

(1) by striking ‘‘2008’’ and inserting ‘‘2008, or “2009’’, and

(2) by striking ‘‘2008’’ in the heading thereof and inserting ‘‘2008, AND 2009’’.

(b) EFFECTIVE DATE. – The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

In plain words, that means the Reinvestment Act of 2009 extends the enhanced incentives established for 2008 = significantly increasing your purchasing power when it comes to buying equipment, vehicles, and software for the rest of this year!

Taxes: it’s a topic that often sparks debates and divides opinions, from the kitchen table to the halls of Congress. They’re a part of our everyday lives, yet they’re anything but straightforward. Let’s delve into some of the most controversial tax codes and proposals that have stirred discussion over the years. Remember, the goal here isn’t to sway you one way or the other, but to provide information and stimulate thought. So, let’s get started!

Flat Tax

One of the most hotly debated tax proposals was the Flat Tax system proposed by Steve Forbes during his 1996 election campaign. This system aims to simplify the tax process by applying a consistent tax rate to all taxpayers, regardless of income. However, critics argue that a flat tax could disproportionately affect lower-income individuals and families, while others can’t agree on how it should be implemented. It’s a concept that is simple in theory but complex in practice.

Alternative Minimum Tax (AMT)

Introduced to ensure that high-income individuals pay a minimum amount of tax, the AMT has sparked controversy due to its lack of adjustment for inflation. This has resulted in an increasing number of middle-class taxpayers being affected. Critics argue that it has strayed from its original purpose and is now impacting those it was not intended to tax.

The Bush Tax Cuts

The Bush tax cuts, introduced with the aim of stimulating the economy, have been a source of controversy. Critics argue they disproportionately benefit the wealthy and are ineffective at stimulating economic growth. Supporters believe they help everyone, including businesses that can then create jobs.

Mortgage Interest Deduction

Designed to encourage home ownership, the mortgage interest deduction allows homeowners to deduct interest paid on their mortgage from their taxable income. Critics argue that this deduction inflates housing prices by encouraging individuals to purchase more expensive homes. Supporters believe it helps make home ownership more affordable.

Mortgage Debt Interest Deduction

In response to the 2008 housing crisis, a proposal was made to exclude forgiven mortgage debt from taxable income. Critics argue that this would create a tax loophole and provide a ‘mini-bailout’ for individuals who made poor financial decisions. Supporters believe it would provide necessary relief for homeowners affected by the crisis.

The 2008 Presidential Election and Taxes

Both candidates in the 2008 Presidential Election proposed tax cuts but differed on their implementation. This stirred a debate on how tax policy can best support the economy and what role tax cuts for the wealthy play in economic growth.

Summary

Discussing taxes can be a complex and often contentious issue. The debate around these tax codes and proposals shows how deeply personal and divisive the subject can be. While these controversies can lead to heated discussions, they’re a crucial part of how we shape our tax policy and, ultimately, our society.

The common thread through these points is TANSTAAFL (There Ain’t No Such Thing As A Free Lunch). Taxes are complex creatures with complex consequences in a complex world. Anybody who tells you different probably doesn’t know what he’s talking about. Except for Steve Forbes, of course. He was on Saturday Night Live.

Disclaimer: This blog post is intended to provide entertaining discussion and does not constitute financial advice. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency of his company or anyone else. Tax laws and regulations are complex and subject to change. Always consult with a qualified tax professional for advice specific to your situation.