The new stimulus plan includes a plan for small businesses in the manner of tax provisions and will have some favorable tax advantages for Ct small businesses.
Here are some of the highlights:
Net Operating Loss - In what is called a “carryback” tax credit, if a business paid taxes on profits in the last five years, but lost money on net operating costs in 2008, they can apply last years loss to the prior years taxes and will likely get a refund on taxes paid in the past.
Equipment Deductions and Depreciation on Equipment – Currently, companies depreciate any new equipment purchases over a period of years. In the new stimulus bill, they will now be allowed to treat new equipment purchases as an operating expense for 2008 and can deduct the whole amount up to $250,000. This is an increase of $117,000 over the previously scheduled limit and will be of great benefit to small business owners who may have seen their profits drop and yet still maintained and invested in their business in 2008.
S-Corps Shorter holding period – This shortens the period that S-corp assets can be sold without paying taxes on built-in gains. This is very important and as a direct impact will allow business owners to retire earlier without facing taxation that may have been doubled if they sold the assets earlier. A built-in gain is the difference between the fair market value of the assets and the tax basis used at the time the company put an S-corp in place.