Small Business Jobs Act of 2010

10/25/2010

Understanding that small businesses are the heart of America, President Obama signed the SMALL BUSINESS JOBS AND CREDIT ACT of 2010 on September 27, 2010. This new tax law provides immediate incentives for small business owners to invest. Click above to read more....

Here are a few of the top benefits to small businessess as a result of the enactment of the Small Business Jobs and Credit Act:

  1. Lower tax bill this year for self-employed's who pay their own health insurance.  Prior to signing the Act, self-employed individuals were allowed an "above the line" deduction for their own health insurance deduction.  Effective for 2010 only, self-employed individuals can now use the premiums paid for health insurance to reduce their net earnings from self-employment for purposes of the self-employment tax!  For example, if your medical premiums paid is $15,000 in 2010, you'll save approximately $2,250 in self-employment tax, effectively reducing your out-of-pocket costs for the premiums to about $12,750.
  2. First year expensing.  Also called the Section 179 deduction which allows you to deduct, in full, the cost of equipment in the year purchased up to certain limits.  Prior to 9/27/10, the limit was $250,000.  It has now been doubled to $500,000 for each of the years 2010 and 2011!
  3. Extension of 50% Bonus Depreciation.  The Act now allows large and small businesses the ability to write off half of the cost of new equipment purchased in 2010.  The original use must be with the taxpayer, i.e. the items purchases can not be used.  It also allows you to depreciate an additional $8,000 for the purchase of a new car, light truck or van in 2010 that is used more than 50% for business.
  4. Increase in Start Up Expenses deduction.  Expenses paid or incurred before a taxpayer opens for business have been allowed as a deduction up to $5,000.  For 2010 only, the limit has been increased to $10,000.  Any expenses that exceed the $10,000 limit are amortized over 15 years.
  5. Simplification of cell phone recordkeeping.  Prior to the signing of this Act, cell phones were treated as "listed property".  This means that in order to write off the cost of the cell phone in the year purchased, the taxpayer had to document that the business use was more than 50%.  Now, with the enactment of the Small Business Jobs Act, cell phones are no longer required to be designated as "listed property".  Taxpayers are able to expense the full cost as long as there is nominal personal use.
  6. Transfers to Roth Accounts.  Effective immediately, you are now able to transfer distributions from a qualified plan (i.e. 401(k), 403(b) and 457 (b) plans) to a Roth account.  Although you will pay tax on the distributions, you will be able to withdraw these amounts at any time from the Roth.  Keep in mind that income from these amounts becomes tax free after five years.  If the rollover distribution is made in 2010, the participant may elect to pay the tax in 2011 and 2012.  Participants should also check with their plan's administrator to make sure such transfers are permitted.

 

The information provided is general in nature and should not be acted upon in your particular situation without further details and/or professional advice.  For assistance, please contact my office.

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