Posted 02.08.2009

Business braces for Obama tax changes

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Last-minute tax fixes for procrastinators

As you may have noticed, Dec. 31, 2008 occurred last year. For tax planning purposes, if you failed to close the books on 2008 on that date, you probably blew it. “Up until 12/31 you have the choice of making some transactions, doing some things overtly that would potentially make some changes for your business, and pay expenses ahead of time that you might not otherwise pay,” says CPA Greg Truitt of Aurora-based Holm Ryan Truitt Hall LLC. Now, “There’s not too much to work with here because everything is after-the-fact,” he adds.

Both Truitt and CPA Fran Coet, of Broomfield-based Coet & Coet, noted that at least you have some 2008 tax changes to consider. “There are fewer choices to manipulate the tax liabilities, but there are still a few things that businesses can take into account,” she says. “They can look at expensing the equipment that they purchased during 2008, because Congress in the Economic Stimulus Act that was passed in February 2008 lifted the expensing provision up to $250,000 from $125,000.” Also, “If you don’t qualify for that then, they offered 50 percent first-year depreciation,” Coet adds.  “For instance, if I went out and bought a car – and obviously I didn’t because nobody did – then I got bonus depreciation for buying a car or truck to work as an offset to the expensing provision.” One more: “Later in the year in the bailout or TARP (Troubled Assets Relief Program) package we got extenders for business for research and development credits,” which leads to an intriguing possibility.

“We have a client who’s developing a low fuel-usage helicopter engine – a pretty niche market there – and has spent a couple of hundred thousand in the research and development of that product,” Coet says. “When we go to prepare his tax returns this year we’re going to have to look at it. Does it make sense to simply expense research and development expenses or to capitalize them? Which is where you can actually get more than 100 percent, because you are capitalizing your expenses. If you can amortize them then you are also getting a credit on top of that.” — David Lewis

David Lewis is a freelance writer based in Denver.

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