How Fleets Benefit From the Economic Stimulus Act of 2008
HR 5140, the Economic Stimulus Act of 2008, a new tax act, was signed by President Bush on February 13. The act includes benefits for individuals and businesses. The terms of the act include two incentives designed to spur capital equipment purchases and are estimated to create $44.8 billion in tax benefits in the form of accelerated equipment write-offs for U.S. businesses.
This article explains the terms in the tax act that impact fleet users and fleet lessors, how the terms in the act are likely to affect fleet costs, and how fleet users can benefit from the new tax rules.
Bonus Depreciation Provided
The new tax act provides qualifying taxpayers 50-percent first-year bonus depreciation of the adjusted basis of qualifying property. The remaining basis (the other 50 percent) is depreciated using the normal modified accelerated cost recovery system (MACRS) rules. The effect is an acceleration of depreciation deductions that reduce tax bills of the acquired property owner in 2008.
To be eligible to claim bonus depreciation, property must meet one of the following criteria:
- Eligible for the MACRS with a depreciation period of 20 years or less.
- Water utility property.
- Computer software (off-the-shelf).
- Qualified leasehold property.
The property must be new and generally must be purchased and placed in service during 2008. The placed-in-service date must occur after December 31, 2007, and before January 1, 2009. The placed-in-service date is extended one year, through December 31, 2009, for property with a recovery period of 10 years or longer, for transportation property (tangible personal property used to transport people or property), and for certain aircraft.
The acquisition of the property cannot be subject to a binding written contract dated before January 1, 2008.