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As the deadline for filing tax returns fast approaches, every spa business owner should be aware of the many recent changes to tax laws, changes that will affect the tax bill for 2008 and for many years to come.
Naturally, not all of last year’s tax law changes apply to spa facilities and businesses. Last summer’s passage of the Housing and Economic Recovery Act of 2008, for example, was notable for the absence of significant business-related tax incentives, as the bill’s First-Time Homebuyer Tax Credit, the Reduced Home Sale Exclusion and other consumer-oriented provisions virtually hid the acceleration of large-corporation estimated tax payments.
Earlier in the year, however, the Economic Stimulus Act of 2008 was signed into law, complete with rebates and business incentives. Most noticeable for the recovery rebates, reaching as high as $600 for individuals and $1,200 for married couples, the new law also included $44.8 billion in business incentives.
Although few spa businesses acquire large amounts of equipment, every owner and manager should be aware that the new law almost doubled Section 179, an immediate write-off for newly acquired equipment, to $250,000—but only for 2008. Thus, up to $250,000 of the cost of equipment acquired and placed in service in 2008 can be treated as a business expense and fully deducted on the tax returns for the 2008 tax year. Should newly acquired equipment costs total more than $800,000 for 2008 though, the $250,000-Section 179 write-off must be reduced, dollar-for-dollar, for the excess above the $800,000 ceiling.
Another provision in the stimulus package allowed small businesses, like many spas, to claim a 50% bonus depreciation allowance for newly acquired equipment. To qualify, the equipment must be eligible for depreciation and have a useful life longer than 20 years. Off-the-shelf computer software and improvements made to leased business property also qualify for bonus depreciation. Best of all, the 50% bonus depreciation applies in both the 2008 and 2009 tax years.