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The Official Publication
of the Mason Contractors
Association of America
Recovering With New Tax Breaks
The Recovery Act helps ease the out-of-pocket cost for new equipment. So-called “bonus” depreciation is available for another year, and the larger, Section 179 first-year write-off for newly acquired equipment has been given another year. Two new groups have been added to those whose first-year wages are partially underwritten, thanks to the work-opportunity tax credit. The business-related tax breaks also include tax-deferred debt forgiveness income. There is also a five-year, rather than a two-year, carryback of net operating losses (NOL) that may return taxes paid in earlier years to the coffers of many masonry contractors and masonry construction businesses.
Cash Infusions from losses
The Recovery Act gives masonry contractors the choice to carry NOLs from the 2008 tax year back three, four or five years, generating a refund of taxes paid in those earlier years. Obviously, the extended NOL carryback provision has the potential for providing an immediate cash infusion to many troubled businesses.
Faster, larger write-offs continued
A write-off bonus
Higher caps on vehicle write-offs
Remember, however, as with any accelerated depreciation write-off, a large current depreciation deduction will result in smaller future deductions. Two situations in which a taxpayer might, for a tax year, consider making an election-out (opt-out) are when the masonry contractor: (a) has about-to-expire NOLs, or (b) anticipates being in a higher tax bracket in future years.
Discounted wage payments for some new workers
Qualified small business stock
The Recovery Act makes small business stock more attractive by increasing the amount of gain from the sale of small business stock held for five years or more that may be excluded from 50 percent to 75 percent for stock issued after the date of enactment of this legislation and before 2011.
Temporary estimated tax payment relief
The “Making Work Pay” tax credit included in the Recovery Act increased the take home pay of workers and required employers to use new payroll tax withholding tables. Self-employed masonry contractors who are not subject to wage withholding can receive the credit in advance by reducing the amount of their estimated tax payments. Remember, however, that it is easy to overshoot the mark and become liable for underpaying estimated tax penalties.
Cancelled debt = income now deferred
Some masonry contractors and businesses would be allowed to recognize so-called “cancelation of debt income” (CODI) over 10 years (defer tax on CODI for the first four or five years and recognize this income ratably over the following five taxable years) for specified types of business debt repurchased by the business after Dec. 31, 2008, and before Jan. 1, 2011.
Something for us as well
The 2009 AMT patch raises exemption amounts slightly above the 2008 patch levels. The 2009 AMT exemption amounts are: $70,950 for joint filers and surviving spouses (up from $69,950 in 2008); and $46,700 for singles and heads of households (up from $46,200).
This massive stimulus bill, the American Recovery and Reinvestment Act of 2009, provides immediate relief to both individuals and businesses with most of the tax incentives retroactive to Jan. 1, 2009. Most of the $280 billion in tax relief is concentrated within the next two years. For masonry contractors, however, professional advice is almost a necessity to ensure their operation will profit from the new Recovery Act.
|Last Updated on Friday, 01 May 2009 14:49|