Have You Taken Advantage of 2009's Small Business Tax Break?

2009 is quickly coming to an end. Have you taken advantage of the tax breaks provided to you by the American Recovery and Reinvestment Act of 2009? If not, you would be wise to use the next few weeks to claim your share of the tax break initiative.

A private survey shows that about 71% of small businesses have taken at least one tax break from the provisions outlined in the 2009 economic relief bill. The government wants to urge small businesses to use these tax breaks before the end of the year because they are not likely to be renewed in 2010. The Federal Assistant Treasurer, Senator Nick Sherry, has issued a statement reminding small business owners of the 2009 deadline and is encouraging them to get with the program.

Best Tax Benefits of 2009

One of the biggest tax breaks is the 50 percent bonus deduction on depreciation on the acquisition of eligible assets. An eligible asset might be equipment over $1,000 purchased this year. This additional expensing of depreciation in the first year can be a tremendous help in reducing the tax burden on small businesses, and it is intended to stimulate the purchase of equipment and assets in 2009.

For instance, say you purchased a new piece of manufacturing equipment for $5,000. Normal depreciation of the equipment would be spread out and take place over a period of 5 to 7 years. However, you can deduct $2,500 in depreciation this year, even if you purchase the equipment on December 31, 2009.

And the 50% tax deduction is not all. You can still take advantage of other incentives, such as work opportunity tax credits for hiring unemployed veterans or “disconnected youth.”

Pre-Pay Your Taxes and Save

If your business pays estimated taxes, you only need to pay 90% of previous tax year liability instead of 100%. If your small business is research-based, you could take a basic 20% credit for increased research expenditures. Or invest in economically distressed areas for new market tax credit.

The credits offered for small businesses in the relief bill of 2009 are likely an once-in-a-lifetime opportunity. Be sure to take the next few weeks to analyze and consider where you can benefit from additional tax breaks.

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