By ALLISSA KLINE
Business First

Small businesses seeking tax breaks bagged some key benefits from the federal stimulus package, which designates about one-third of the total $787 billion to tax incentives.

Tax breaks that are applicable to most small businesses include:

• A five-year carryback of net operating losses.

• An extension of the small-business expensing allowance.

• An extension of bonus depreciation.

Here's a breakdown of what each incentive means and how small businesses can stake out the breaks.

The five-year carryback

Under prior law, businesses with net operating losses could carry back those losses up to two years before the loss year. Businesses that lost money in 2007, for instance, could carry that loss back two years, to either 2005 or 2006, in order to get a tax refund.

The new law pushes the carryback period back to five years, and businesses may select which of the five years to carry the loss. The catch: The tax break applies to companies with $15 million or less in gross receipts, or sales.

"If in 2008 you have a loss, you can go back to 2003, 2004 or 2005 and use the carryback against any taxable income you had in those years," says Paul Kiel, a partner at Nowicki & Co. LLP.

The impact: more money in hand.

"This will be helpful to the cash flow," says Peter Bellanti, senior tax manager at Amato Fox & Co. PC in Tonawanda. "That's going to be a quick way for people to pick up some money."

Businesses that qualify can take advantage of the carryback on their 2008 tax returns.

Extension of expensing allowance

The higher depreciation-expensing allowance for businesses was supposed to expire in 2008. The stimulus package, however, extends the expensing allowance for another year.

With the IRS Section 179 Deduction, businesses can write off up to $250,000 spent on certain business assets, such as office furniture, office fixtures, machinery used for business purposes and business vehicles larger than 6,000 pounds. For example, a company that purchases $300,000 in eligible equipment can write off $250,000 in one year.

"What this really allows you to do is expense today what you may have had to expense over a three- or five-year period," says Bob Pollock, a partner in the tax advisory group at Dopkins & Co. LLP. "This will reduce the amount of tax you owe today," he says.

Extension of bonus depreciation

Like the Section 179 Deduction, the federal bonus depreciation tax break was set to expire in 2008, but it too has been extended.

Under this federal provision, companies can take a 50 percent depreciation on the cost of eligible purchases.

"This allows companies who buy a piece of equipment or invest in an asset of 20 years or less to make an election to take 50 percent of that depreciation in the first year," says Scott Jordan, a partner in the tax advisory group at Gaines Kriner & Elliott LLP.