The Job Creation and Worker Assistance Act that passed in March created last-minute headaches for tax preparers, but also offered substantial tax breaks for businesses able to take advantage of them.
With the April 15 filing deadline looming as the law was enacted, some accountants had to scramble to amend tax returns for 2001 to take advantage of the new provisions, says Jim Holtzman, a CPA and a financial planner with Legend Financial Advisors Inc.
But the extra work was worth it, he says.
Designed to help individuals and businesses affected by the Sept. 11 terrorist attacks, the legislation offers attractive incentives for business owners to make capital investments, as well as write off prior year losses to offset taxable earnings.
A more generous first-year depreciation allowance on capital equipment investments, which includes most types of business property except real estate, applies to purchases made between Sept. 11, 2001, and Sept. 10, 2004. Businesses can claim an additional 30 percent depreciation in the first year on such expenditures.
“You certainly don’t want to go out and buy a $15,000 piece of equipment just to get the depreciation,” says Holtzman, but taking advantage of the tax break might make sense for a business considering a major capital investment to improve its operations or prepare for a business rebound.
Additionally, the carry-back period for net operating losses has been extended temporarily from two years to five years for losses occurring in 2001 or 2002.
Other features of the Job Creation and Worker Assistance Act include an extension of the pilot program that allows the establishment of medical savings accounts to cover out-of-pocket medical expenses. The program was scheduled to expire at the end of 2002, but has been extended to the end of 2003.
For business owners who use an automobile for more than 50 percent business use, a maximum $7,660 first-year deduction on luxury vehicles is available, up from the previous $3,060 limit.
And if you think you have deductions that you didn’t include on your 2001 filing, you can file an amended return. How to reach: Legend Financial Advisors Inc., www.legend-financial.com