Save Thousands of Dollars with Special Depreciation Rules in 2008 Stimulus Act

By Emily Lehnen
Senior Marketing Manager

In addition to paying out to individuals, the 2008 Stimulus Act passed earlier this year provides extra incentives for businesses. Two special depreciation rules apply for assets put into service in 2008, allowing companies to garner thousands of dollars in tax savings. Following is an explanation of the rules, and an example of the potential savings.

While lots of capital assets qualify for the special depreciation, I’m going to discuss how they relate to software purchases, one of the qualifying assets.

The incentives include:

• A 50% first-year bonus depreciation
  Software normally depreciates at a rate of 33% per year. With the incentive, for the first year an asset is placed into service, companies can depreciate 50% of the cost of an asset in addition to the regular 33% depreciation and any Section 179 deduction.



• Increase in “Section 179 Expensing”
  A company can elect to treat an asset as an expense and depreciate the asset in one year instead of over several years. This practice is referred to as “Section 179 Expensing”, very cleverly named after the IRS code that explains it. If a company chooses to do this in 2008, it can expense up to $250,000 of the cost of the asset, up from the general limit of $128,000. Again, a company can take advantage of this special allowance in combination with the 50% first-year bonus depreciation./LI>

Real World Example of Savings
Before your eyes completely glaze over from looking at IRS codes, let me show an example of the potential tax savings. Let’s say you send $300,000 on upgrading or purchasing new software, and that software is put into service in 2008. Below is a calculation of the maximum depreciation allowed in 2008.

Purchase Price: $300,000
Section 179 expensing: $250,000

Remainder to use for calculating
other depreciation: $50,000

50% Bonus depreciation: $25,000
33% Standard depreciation: $7,500

Total depreciation amount
($250,000 + 25,000 + $7,500): $283,250

Total 2008 Tax Savings
(assuming 32% tax rate): $90,6400

Without the two 2008 incentives, this same software purchase would result in a tax savings of only $58,880. These incentives are a great way to bolster your ROI justification for starting a software project.

The Discipline of Project Justification: Part 7 – Creating Story Boards

By Tom DeVroy
VP of Sales

When selling software, the most difficult kind of users to win over are end users. Senior managers tend to have some vision or preset notion of how they would like things to run in the future versus how they run today. They think in terms of efficiencies, overlapping processes and increase productivity. The Future-State model.

End users, on the other hand, don’t think in terms of change. They think about how things work today, and the steps they need to take to get their job done. The Current-State model. Therefore, the prospect of change, especially is not explained well by management, creates a lot of anxiety for end users.

To dispel this anxiety, managers need to help end users look past the Current State, and help them visualize the Future-State. To so this, it is essential that management and project leaders clearly map out the path for change and how it will affect the end user. They need to explain to the user community how their job will look in the future, and that the new system is just a tool to help them do their jobs better, faster, more easily.

At Metrix, we use the creation of story boards to help explain the path for change for new processes. This usually takes the form of a flow chart or some other diagram that explains how processes will be performed and by whom. It’s even better when the application software vendor can demonstrate these new processes so people can visualize the new model, and their job function in it.

So if a simple narrative doesn’t do it, take the time to define the future state, lay out how it affects people, and define what their new job responsibilities will look like when the new tool is selected.