New Tax Rules For The Retiree Business Owner

If you are a retiree and business owner, you can improve the state of your business

and overall finances by taking advantage of the new tax rules and using them to buy equipment and some business needs at a lower price. However, you will need to look at and understand the tax bill and the depreciation rules it contains to be able to get substantial tax breaks for the New Year.

These rules fall under the term bonus depreciation, and expand the regulations that permit businesses that qualify to expense all or some of their new asset purchases soonest, compared to depreciating these over a number of years. For 2011, bonus depreciation is pegged at 100%, but will revert to 50% the following year, and disappear sometime after 2012.

In addition to these perks, property small businesses can consider tax write-offs have shot up to a cool half-million in 2010 and 2011. It will then return to its previous lower level after. The difference between this and bonus depreciation is that the $500,000 write-off only applies to small business, unlike the bonus depreciation that may be used by businesses of all sizes.

Although the rules and effects may seem complex to some, a good understanding of the rules and the proper application can amount to sizeable financial benefits for established or start-up businesses that need equipment such as new PCs, phones, and so on. The tax benefits and when they apply can lessen the impact of the money shelled out at the onset on your overall funds, and make the amount seem less than if it were to depreciate in increments over several years.

Lawmakers have allowed quicker asset depreciation over the last ten years, which has helped many businesses survive and thrive despite the sluggish economy. For instance, the rules about bonus depreciation were only applicable to less than a third of the value of the new asset, and then increased to fifty percent. Now, the rules allow 100% depreciation, which are advantageous as they give businesses more purchasing power for expansion and other moves while the nation still struggles to get on its feet.

Will the tax benefits of these regulations effectively stimulate the economy? While the new tax rules may not be a cure-all, bonus depreciation (even at lower levels) have a modest but recognizable effect that can help the retiree business owner and other business people stabilize their businesses and possibly earn more in these lean times.

by: Katherine Smith

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