How Does the Economic Stimulus Act of 2008 Effect Your Equipment Purchases?

In an attempt to revitalize a slowing economy, President Bush signed into law on Feb 20th the Economic Stimulus Act of 2008. Thanks to this new set of policies, lower and middle income taxpayers stand to benefit from additional rebate checks and an easier time refinancing their mortgages.But taxpayers are not the only ones benefiting. The ESA temporarily reinstates a first-year depreciation deduction equal to 50 percent of the cost of the equipment. Qualifying equipment and other fixed assets must be purchased after Jan 1 2008, and put into use by Dec. 31, 2008. During this period, a business may claim an additional first-year 50% depreciation deduction on purchased assets plus the normal first year depreciation deduction (which is 20% for 5-year assets) on the remaining net cost.

Another noteworthy change to the tax code involves a significant increase to the Section 179 expensing limits. Previously, the limit on equipment purchase deductions was $128,000, and the total cost of equipment purchased could not exceed $510,000. The Economic Stimulus Act of 2008 has almost doubled the deduction cap, to $250,000, and raised the total allowable cost of new equipment purchases to $800,000.

Though experts disagree regarding the effect the Economic Stimulus Act of 2008 will actually have on the economy, one thing is clear: if you own a small business and are need of new or additional equipment, now is the time get it.

The Benefits of Server Virtualization

If your business depends on multiple server applications, and you are looking for ways to cut costs while improving efficiency, then server virtualization is the way to go. Through server virtualization, multiple server applications (10 is about average) can be consolidated onto one physical server. Each virtual server is then isolated from the physical system via virtual processors, interrupts and devices.The benefits of server virtualization are many. Firstly, you can maximize your current hardware and software capabilities while preserving integrity of the entire system. Since each virtual machine is a separate entity, if one application crashes, there will be no impact to the other applications running on that same physical server.

Another major benefit to server virtualization is the impact it will have on your efficiency. Management tasks can be automated and controlled from a single point. Maintenance also becomes easier as virtual machines have the ability to be shut down, transferred across the network to a new physical server and accessed instantly.

Server virtualization also brings about significant savings. Not only do you save on physical floor space and having to buy a lot of hardware, but you also save money on maintenance, energy, and installation.

2008 Trends in the Acquisition of Construction Equipment

According to the 2008 Wells Fargo Construction Industry Forecast, even with signs of a slowing economy American contractors are looking this year to buy, lease, and rent additional construction equipment. The forecast, which was conducted last fall, was based on more than 1,150 telephone surveys with executives of construction contracting companies and construction equipment distributor firms throughout America and Canada. According to those surveyed, 37% of contractors expect to make equipment purchases in 2008, which is only 5% fewer than the previous year’s forecast.

What are contractors buying?

A third of contractors who plan to buy construction equipment are considering both new and used equipment, up from 19% with similar plans a year ago. Almost half of contractors plan to buy only new equipment in 2008, while 20% are looking to purchase only used machinery.

Thirty-eight percent of the contractors who plan to invest in equipment in 2008 expect to purchase at least one highway truck. The most common expected purchases among contractors include: hydraulic excavators, rubber-tire backhoe loaders, wheel loaders and crawler dozers.

Trends in leasing and renting

According to the industry forecast, the percentage of contractors looking to rent or lease equipment in 2008 is expected to rise to 19%. Just over half of contractors find renting or leasing a good alternative to purchasing construction equipment, especially for equipment that is not often used. One-third said they rent to meet unexpected needs, and 21% said lower cost makes renting an attractive option.

Contractors rent or lease a wide range of equipment including: loaders, backhoes, dozers, forklifts and fork trucks

Finance issues

Over half of contractors (55%) and almost half of distributors (49%), said cash flow was one of the construction industry’s most serious problems for 2008. More than half of each group also considers profit margins and cost of capital to be serious issues.

When determining the right financial services provider, several factors are considered important. Top on the list was personal experience with the provider (89%), followed by construction industry reputation (81%), and interest rates (79%).

How to Keep Your IT Costs Low

With the possibility of an economic recession looming in the not-to-distant future, many small business owners are taking a preemptive look at the way they do business with the goal being to maximize their operations while simultaneously reducing expenses. Since IT is often a major cost center, knowing how to effectively reduce expenses while still getting necessary hardware and software systems is an essential element in recession-proofing a small business. Here are a few tips on how you can keep your IT costs under control:

• Get advice. Seek the advice of a professional IT consultant or any person who has experience either in your industry or in the technology you want to acquire. This is especially important if you yourself are not so tech savvy or if you do not have the time to research your options.

• Plan ahead. Get equipment that has the capacity to handle future growth or that can be easily upgraded.

• Evaluate and prioritize. In order to streamline your IT expenses, you will need to periodically reevaluate the equipment needs of your business versus your available resources. Where possible, you could consolidate equipment, as for example in server virtualization, or set up a system of rotating equipment among employees.

• Look into leasing. Instead of tying up precious capital in the purchase of new equipment, you could try leasing. With leasing, usually only a small initial down payment is needed and the cost is spread out over several months or years. Moreover, many leases come with option to upgrade at the end of the term. This allows a small business to get the equipment it needs even as its needs change.

• Maximize tax deductions. With the planned purchase or lease of new equipment, you can take advantage of several tax breaks. Section 179 of the tax code, for example,gives a small business the option to entirely write off most of its new equipment and furniture in the year that it is put into service rather than depreciating it over a few years.

• Consider outsourcing. Some technology solutions, such as IP communications and network security, can be outsourced to a professional service provider who can design, implement and maintain the technology solution for your business. The service provider will either host the equipment on their premises or support and maintain the equipment at your site.

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