As the dust settles from President Obama’s extension of the Bush Tax cuts, the administration expects to see the effects immediately. With a new “100% expensing” policy included in the new tax law, small businesses will now be able to fully write off “productive investments”.
The immediate write-off will free-up cash by lowering taxable income for companies, allowing them to more freely spend on new equipment, expansion, or payroll. The treasury department expects that 2 million companies will take advantage of the new expensing rules.
Some of the highlights include:
- 100% expensing through the end of 2011. Current tax law allows companies to depreciate 50% of qualified investments up front. The new law will also allow for retroactive extension to September 8, 2010.
- Expensing is expected to generate $200 billion in cash flow over the next 2 years, helping cautious companies make the investments sooner.
- A business making $1 million in investments, and paying a 35% tax rate, will decrease 2011 taxes by $350,000, as opposed to $50,000 under the previous expensing rules.
Economists expect that the provision won’t spur companies to create purchase needs, but instead will act as an incentive to accelerate planned growth investments in 2011.
Where to find financing for your business
Does your business need a working capital loan to take advantage of tax benefits? Contact Direct Capital – the trusted leader in small business loans and equipment financing solutions.