American Recovery and Reinvestment Act of 2009

In response to the economic downturn experienced in 2008 and 2009, Congress passed the American Recovery and Reinvestment Act of 2009, to provide economic stimulus in the form of tax credits and deductions, as well as updating some previous tax incentives.

Net Operating Loss (NOL)
If a business tax return has more deductions than income, it has a "net operating loss". An individual tax return could also have a net operating loss if business deductions exceed income (e.g. the loss of a sole-proprietor, or loss from an interest in a pass-through business like a Partnership or S-Corporation). Normally the business or individual could carry the loss back to the tax return for the second year previous to the loss year, and receive a tax refund for deducting the loss on that previous years' return. Under the new law a Net Operating Loss may be carried back to the fifth, fourth, or third year previous to the loss year; the taxpayer therefore can choose the year that will maximize the available refund. For the 3, 4, or 5 year choice to be available the 2008 tax return must have been filed on time, by its regular or extended due date and must have included a statement choosing the previous year to which the loss will be carried. Other time restrictions apply. Certain procedures apply for choosing this treatment.

Recent Update: The Worker, Homeownership and Business Assistance Act of 2009, signed into law on November 6, 2009, extends this treatment to losses occurring in 2009.

Election to Expense Depreciable Property
Section 179 of the Internal Revenue Code allows taxpayers to deduct the total cost of business assets that would be deductible over a period of years by depreciation, in the year placed into business service. The maximum deductible amount of such assets is $ 250,000 if placed into service in 2009. The maximum deductible amount of a Sports Utility Vehicle used for business is $ 25,000 for 2009.

Standard Mileage Rate for Business Use of an Automobile
For the year 2009 the rate for deducting business use of an automobile is 50.5 cents per mile. For 2010 this rate is reduced to 50 cents per mile. This rate may be used to calculate a business deduction as an alternative to deducting actual auto expenses for business use. The rate is usable by employees and self-employed taxpayers.