Provided below is information on business deductions that are available in 2009, as well as a few tax planning tips.

Equipment Purchases: If you are in business and purchase equipment, you may make a “Section 179 Election,” which allows you to expense otherwise depreciable business property. For 2009, you may elect to expense up to $250,000 of equipment costs (with a phase-out for purchases in excess of $800,000) if the asset was placed in service during 2009. In 2010, these dollar amounts are reduced to $125,000 and $500,000 (subject to inflation adjustments), so 2009 is the year to put property into your business to take advantage of the increased dollar amounts. Be aware that there are different deduction limits for vehicles purchased, so please contact us if you plan to purchase a business vehicle before the end of the year.  In addition, careful timing of equipment purchases can result in favorable depreciation deductions in 2009. In general, under the “half-year convention,” you may deduct six months worth of depreciation for equipment that is placed in service on or before the last day of the tax year.  If more than 40% of the cost of all personal property placed in service occurs during the last quarter of the year, however, a “mid-quarter convention” applies, which lowers your depreciation deduction.

Self-Employed Health Insurance Premiums: Self-employed individuals are allowed to claim 100% of the amount paid during the taxable year for insurance that constitutes medical care for themselves, their spouses and dependents as an above-the-line deduction, without regard to the 7.5% of AGI floor.

NOL Carryback Period: If your business suffers net operating losses for 2009, you generally apply those losses against taxable income going back two tax years. Thus, for example, the loss could be used to reduce taxable income — and thus generate tax refunds — for tax years as far back as 2007. Certain “eligible losses” can be carried back three years; farming losses and qualified disaster losses (for losses arising in taxable years beginning after 2007 in connection with disasters declared after December 31, 2007) can be carried back five years.

If you have any questions concerning these topics, please contact one of our tax professionals.