Job Creation & Worker Assistance Act of 2002.

Highlights of the Job Creation & Worker Assistance Act of 2002

The Job Creation & Worker Assistance Act of 2002 greatly affects businesses for the coming years. The act was passed to help businesses with many changes regarding depreciation and retirement plans. The majority of the changes benefit businesses, however there are a few benefits for individuals.

Business Changes

Businesses may claim an additional 30% first year depreciation deduction for assets purchased between September 11, 2001, and September 10, 2004 and placed in service before January 1, 2005. This depreciation deduction applies to most business property, except real estate. The remaining cost of the asset is then depreciated using the appropriate method.

Example
A business purchases $10,000 of equipment on March 31, 2002. The business would claim a $3,000 additional depreciation deduction, and the remaining $7,000 would be depreciated accordingly in 2002, and from then on.

In addition, the act increased the limit of first year depreciation for vehicles used for business purposes. The limit for tax year 2002 is $7,660, up $4,600 from the 2001 limit of $3,060.

Other changes include the extension of the Net Operating Loss Carry-back for tax years 2001 & 2002 from 2 to 5 years. Also, the annual limit on employer contributions for Simplified Employee Pensions (SEP’s) increases to the lesser of 25% of employee compensation or $40,000.

Individual Changes

Teachers and other employees of schools, who buy supplies for the classroom, are finally getting a break. Beginning with tax year 2002, qualifying supplies (books, equipment, supplies, computer hardware & software) up to $250 may be deductible on your tax return, even if you do not itemize. The deduction applies to teachers, counselors, aides, and principals of students in grades Kindergarten through 12th.

There are a few changes other for individuals, including the Adoption Credit limit increasing from $5,000 to $10,000 for 2002.

You may reach Sammy at SammyLee@skleecpa.com