Our economic quagmire has construction contractors and equipment suppliers deep in worry and crunching the numbers as the end of 2008 draws near. Equipment dealers at a recent trade show bemoaned slow equipment sales, and with good reason. With the precarious situation for highway contracts in the next few months, many contractors do not feel they need more machinery right now. Those who are working are taking care of the machinery they have, as field service and product support representatives attest.
To help new equipment sales, manufacturers are offering very attractive financing rates, even though they are tightening up on loan qualifications. If you do qualify for a manufacturers’ loan and have been considering a new piece of equipment, this is a good time to make that move. Equipment dealers are making good deals, and the 50 percent depreciation bonus expires at the end of this year.
Remember HR 5140, the Economic Stimulus Package of 2008 that President Bush signed last February? This legislation also enacted incentives to spur business investment by allowing American businesses to buy new equipment this year and deduct an additional 50 percent of the cost of their investment in 2008. Buying equipment, software, and tangible property this year will dramatically lower your taxes.
Under the new law, a taxpayer is entitled to depreciate 50 percent of the adjusted basis of certain qualified property during the year that the property is placed in service. To qualify for the 50 percent special depreciation allowance under the new law, the property must be placed in service after Dec. 31, 2007, but generally before Jan. 1, 2009.
To reflect the new 50-percent special depreciation allowance, the IRS developed a new version of the depreciation and amortization form for fiscal year filers. The new form is designated as the 2007 Form 4562-FY and is available on this website.