search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!

Economic Stimulus Act Offers Big Benefits To Contractors

By Russ Roy
September 8, 2008
Detailed guidelines outline tax incentives for construction software and equipment purchases made in 2008.



Although a great deal of media attention has been given to the 2008 Economic Stimulus Act and how it benefits individual taxpayers, less information has been shared about the tax incentives that this law delivers to businesses.

For construction companies, there are some very useful provisions within the Act, primarily around depreciation deductions for new software and equipment purchases. But time is running out for you to take advantage of them: Purchases must be made by Dec. 31, 2008, to qualify for the maximum depreciation allowances.

To help sort through the specifics of the Economic Stimulus Act, construction software provider Construction Partner talked with Kevin Thurman, a CPA with ThomasYork, a California-based CPA firm that specializes in construction.

According to Thurman, there are two parts to the Stimulus Act’s deprecation features. Part one involves revisions to Section 179, a long-standing tax law that allows businesses to deduct a specified amount of equipment purchases each year. Part two involves bonus depreciation on equipment purchases made in 2008.

Section 179 Depreciation

Under Section 179, businesses can expense up to $250,000 of new and used asset purchases made in 2008. (This is double the 2007 deduction of $125,000.) Qualified purchases include equipment, machinery, furniture and even construction-specific software (as well as the hardware needed to run that software).

However, Section 179 isn’t without limits. “One caveat of this tax benefit,” says Thurman, “is that you can’t buy more than $800,000 in qualifying purchases without losing some of the benefit.” Making multiple heavy equipment purchases, for example, would likely put a contractor above the $800,000 limit and he would forfeit that initial $250,000 deduction. On the other hand, contractors that buy $250,000 or less in qualifying purchases would get to deduct those purchases in full on their 2008 tax return.

Bonus Depreciation

The new bonus depreciation allowance is where the Stimulus Act gets interesting. “The bonus depreciation provides an additional 50 percent deduction on new purchases that can be taken in conjunction with Section 179,” explains Thurman. (The bonus depreciation is available even if purchases exceed the Section 179 $800,000 limit.)

Here’s how the bonus depreciation works: Let’s say you make software and equipment purchases in 2008 totaling $750,000. The first $250,000 of depreciation deduction comes right off the top, which leaves $500,000 remaining of your original purchases.

You’re now allowed to deduct an additional 50 percent, which would give you another $250,000 in deductions.

In addition, you’re also allowed to take your regular multiyear depreciation deductions if applicable. In this example, regular depreciation would apply to the final $250,000.

“The end result is an incredible tax deduction,” states Thurman. “If you’re considering purchases in excess of $800,000, even though you won’t be able to take advantage of Section 179’s $250,000 deduction, you may want to go ahead with those purchases in 2008 because of the 50 percent bonus depreciation benefit you’ll get up front.”

Software And Other Purchases

Although software purchases are typically depreciated over three years, the 2008 tax provisions make this an especially good year to upgrade your construction accounting solution. In most cases, you’ll get a 100 percent tax deduction in 2008 for your software purchase and hardware upgrades.

Other business benefits of the Economic Stimulus Act involve vehicle purchases and leasehold improvements. The new tax laws provide some incentives around the purchase of “luxury” automobiles and “heavy” vehicles. (Sport utility vehicles are in a tax class by themselves.) In addition, if you lease your office space, you might be eligible for tax breaks if you make improvements to that space.

Special Cautions For Contractors

Before you run out and stimulate the economy with your new purchases, however, you need to consider what impact these purchases might have on your operations. Issues to consider include:

  • Bonding. “A construction company is very dependent upon its ability to secure bonding,” explains Thurman. “One of the major things that a surety company will look at is your cash flow. You need to balance how much cash you spend or borrow to buy new equipment with what you leave in reserve. Depleting your cash on hand or having too many liabilities on your balance sheet can hurt your bonding capacity.”


  • Fiscal year. “Bonus depreciation applies to purchases made from Jan. 1 through Dec. 31,” cautions Thurman. “Even if your fiscal year is March to March, for instance, to get the maximum benefit you still need to make your purchases before Dec. 31, 2008.”


  • The best way to ensure that your business gets the most benefit from all of the provisions in the Economic Stimulus Act is to consult with a professional that specializes in construction accounting and taxation.

    “The bottom line,” states Thurman, “is that you shouldn’t make your final decision to purchase new equipment based solely on the tax break. If implementing new construction accounting software will give you greater control over costs and help your staff work more efficiently, then that purchase is absolutely a good business decision - no matter what the tax incentive may be.”

    Share This Story

    Looking for a reprint of this article?
    From high-res PDFs to custom plaques, order your copy today!

    Russ Roy is president of Construction Partner, a provider of powerful, integrated construction accounting, job costing, service management and estimating software. For more than 20 years, Construction Partner has been helping plumbing and mechanical contractors automate and simplify their accounting processes. Companies that use Construction Partner report increased efficiencies, more accurate job costs and a low total cost of ownership. For more information, visit www.ConstructionPartner.com or call 800/395-7474. For more information about Kevin Thurman, a CPA and tax manager with ThomasYork LLP, call 925/498-6200 or visit www.ty-llp.com.

    Recommended Content

    JOIN TODAY
    to unlock your recommendations.

    Already have an account? Sign In

    • Worker using the Milwaukee Tool SWITCH PACK drain cleaner

      Pipeline profits: Drain cleaning, pipe inspection create opportunities

      Drain cleaning and inspection services offer lucrative...
      Plumbing News
      By: Nicole Krawcke
    • Uponor employee, Arturo Moreno

      The reinvestment in American manufacturing and training

      Plumbing & Mechanical Chief Editor Nicole Krawcke and...
      Plumbing News
      By: Nicole Krawcke and Natalie Forster
    • March 2024 Women in Plumbing hero image of woman engineer overlayed by circle of hexagon shapes with numbers from 1 to 10

      Celebrating 10 Influential Women in the Plumbing Industry

      Celebrating Women's History Month and Women in...
      Plumbing News
      By: Nicole Krawcke
    Subscribe For Free!
    • eNewsletters
    • Online Registration
    • Subscription Customer Service
    • eMagazine
    • Manage My Preferences

    More Videos

    Sponsored Content

    Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Plumbing & Mechanical audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Plumbing & Mechanical or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

    close
    • J.J. Keller CMV vehicles on road
      Sponsored byJ. J. Keller & Associates, Inc.

      The dash cam game-changer for small business safety

    Popular Stories

    Rovanco fire.jpg

    Fire breaks out at Rovanco Piping Systems' Joliet manufacturing facility

    Underfloor heating installation with drain sewer hole in bathroom close up on water floor heating.

    Using hydronics to leverage time-of-use electrical rates

    Close-up of a man holding a blue helmet. Construction worker with office and people in background. Close-up of a construction worker's hand holding a working helmet.

    Enhancing workplace safety through challenges

    PMCE Home-X April 29 Free Webinar: From Legacy to Leadership: Preparing Your Home Services Business for the Next Generation

    Events

    November 13, 2024

    Future Proofing MEP: Navigating the 2026 High Efficiency Water Heating Standards

    Join our deep dive into DOE’s new standards so you can future-proof your MEP practice.

    EARN: 0.1 ASPE CEU; 1 AIA LU/HSW; 0.1 IACET CEU*; 1 PDH

    May 15, 2025

    From Legacy to Leadership: Preparing Your Home Services Business for the Next Generation

    Whether you're passing the torch to a family member or grooming current employees for leadership, preparing the next generation of leaders is key.

    View All Submit An Event

    Poll

    Will business be up or down in 2025?

    Do you anticipate business in 2025 to be up or down in comparison to 2024?
    View Results Poll Archive

    Products

    The Water Came To A Stop

    The Water Came To A Stop

    See More Products

    Download the FREE Water Conservation, Quality & Safety eBook: Plumbing Trends Increasing Safe Water Availability

    ×

    Keep your content unclogged with our newsletters!

    Stay in the know on the latest plumbing & piping industry trends.

    JOIN TODAY!
    • RESOURCES
      • Advertise
      • Contact Us
      • Directories
      • Store
      • Want More
      • Supply House Times
    • SIGN UP TODAY
      • Create Account
      • eMagazine
      • eNewsletter
      • Customer Service
      • Manage Preferences
    • SERVICES
      • Marketing Services
      • Reprints
      • Market Research
      • List Rental
      • Survey/Respondent Access
    • STAY CONNECTED
      • LinkedIn
      • Facebook
      • Instagram
      • YouTube
      • X (Twitter)
    • PRIVACY
      • PRIVACY POLICY
      • TERMS & CONDITIONS
      • DO NOT SELL MY PERSONAL INFORMATION
      • PRIVACY REQUEST
      • ACCESSIBILITY

    Copyright ©2025. All Rights Reserved BNP Media.

    Design, CMS, Hosting & Web Development :: ePublishing