Depreciation in Small Business Loan Bill Spurs Investment, Jobs

By September 27, 2010Economy, General, Taxation

President Obama this afternoon signed into law H.R. 5297, the Small Business Jobs and Credit Act, which allows businesses of all sizes to immediately write-off 50 percent of the cost of depreciable property purchased and placed in service anytime during 2010.  This provision is a temporary extension of the bonus depreciation provision included in both the 2008 and 2009 economic stimulus laws.  The new law also includes a provision that increases Section 179 expensing for two years by increasing the expense limitation to $500,000 with a phase-out threshold of $2 million for years 2010 and 2011.

The bonus depreciation provisions will encourage manufacturers to make investments that create jobs.  For example, Joseph McGlynn, executive vice president of Campbell Fittings Inc., a small manufacturer of industrial hose couplings in Boyertown, Pa., is working now to purchase factory floor equipment that will be eligible for the 50 percent  bonus depreciation extension available thanks to the new law. The company plans to hire an additional 4-5 employees to run two new pieces of equipment it hopes to purchase and have operating before year’s end.   

For a technical explanation of the new investment incentives, see pages 7-15 of the Joint Committee on Taxation technical explanation.

Details on the 2010 bonus depreciation and expensing provisions, prepared by Deloitte, can be viewed on the NAM website on pages 2 and 3.

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