THE AMERICAN RECOVERY and Reinvestment Act of 2009 (better known as the Stimulus Act) includes a laundry list of tax changes, including four provisions that will be very helpful for many small to medium-sized businesses. Here’s the scoop.

Extension of the Generous “Section 179” First-Year Depreciation Deduction

Under the Section 179 deduction privilege, many small and medium-sized businesses can write off most or all of the cost of qualifying new and used assets in the year when they are first put to use. Even better, most depreciable assets (other than real estate) qualify for this ultra-favorable deal, including equipment and purchased software.

Now, thanks to the Stimulus Act, the maximum Section 179 deduction will remain at the $250,000 level for eligible assets placed in service in tax years beginning in 2009 (same as last year). Without this change, the maximum write-off would have fallen back to $133,000.

There is a phase-out rule, however, so larger businesses may not qualify for the deductions. Under this rule, the Section 179 deduction is reduced dollar for dollar by the excess of qualifying assets placed in service during the year (those that would otherwise be eligible for the Section 179 privilege) over the applicable phase-out threshold. For tax years beginning in 2009, the Stimulus Act maintains the phase-out threshold at the relatively generous level of $800,000 (the same as last year).

Example: Your medium-sized corporation adds $900,000 worth of new and used equipment and software during the 2009 tax year. Due to the phase-out rule, your company’s Section 179 deduction is reduced to $150,000 ($250,000 minus the $100,000 excess over the $800,000 phase-out threshold).

One important point: If your business already has a tax loss for the year (or close) be aware that you can’t claim a Section 179 write-off that would create or increase an overall tax loss for the year. As a result, part or all of your expected deduction could disappear. Consult your tax pro if you think this could be an issue for your business.

Extension of 50% First-Year Bonus Depreciation Break

The new law also extends the 50% first-year bonus depreciation break for one year, to cover qualifying new (not used) assets that your business places in service by December 31, 2009.

Unlike the Section 179 deduction privilege, this bonus depreciation is available to even the largest businesses. Of course, small- and medium-sized businesses that can take advantage of both the Section 179 deduction deal and the bonus depreciation break are the biggest winners.

Here’s how that works: First, your business can deduct up to $250,000 worth of new (and used) assets thanks to the Section 179 deduction. Then, your business can deduct 50% of the remaining cost of most new (not used) assets under the first-year bonus deprecation deal. Combining these two breaks can offset a big chunk, or maybe all, of your outfit’s taxable income for the year.

Bigger Depreciation Deductions for New Autos and Light Trucks

If your business buys a new (not used) passenger car or light truck that is subject to the dreaded luxury auto depreciation limitations (most are except for big SUVs and pickups), the bonus depreciation break increases your maximum first-year depreciation deduction by $8,000 (for vehicles placed in service by Dec. 31, 2009).

* For new cars, the estimated maximum first-year depreciation deduction for 2009 is $10,960 (assuming 100% business use).

* For new light trucks, the estimated maximum first-year deduction for 2009 is $11,060 (also assuming 100% business use).

Longer Carry-Back Period for 2008 Losses

The Stimulus Act temporarily allows eligible businesses to carry back 2008 net operating losses for three, four, or five years in order to obtain refunds of taxes paid for those years. Typically, a two-year carry-back rule applies. The election is only available for losses generated by businesses with average annual receipts of $15 million or less during the three-year period that precedes the year you record a net operating loss.

* If your business uses the calendar year for tax purposes, you can make the extended carry-back election for a net operating loss that was generated in calendar year 2008. You have to make the election by April, 17, 2009, however. Consult your tax pro for details.

* If your business uses a non-calendar tax year, you can make the election for either: (1) the tax year that ended in 2008 or (2) the tax year that began in 2008. Just keep in mind that you can make the election for one year or the other, but not both. Pick the one that does you the most good. Once again, depending on your tax year, you may have to take action by April 17, 2009. Talk to your tax adviser.

One final point: While your business cannot create or increase a net operating loss with Section 179 deductions, it can do so with 50% first-year bonus depreciation deductions. Then, you may be able to carry back the net operating loss for up to five years (under the rules above) and collect major tax refunds. Talk to your pro about that possibility, as well.