Another Economic Stimulus

Temporary Incentives Could Affect Businesses of All Sizes

Although Congress was unable to tackle the controversial issue of future income tax rates before the 2010 midterms, it quietly passed a little-noticed tax package: the Small Business Jobs Act of 2010 (H.R. 5297). Here’s a roundup of some of the bill’s major provisions.

Lending support — A $30 billion lending fund was created to make inexpensive credit available to small businesses. The loans will be made available through community banks.¹

Bonus depreciation — The 50% first-year bonus depreciation, which expired at the end of 2009, was extended through 2010. It allows 50% of the cost of a depreciable item to be deducted as an expense in the first year of ownership. The additional year of bonus depreciation for equipment with a recovery period of 10 years or longer, and for tangible property used to transport people or equipment, was extended through 2011.²

Maximum first-year depreciation caps for new vehicles increased to $11,060 for passenger automobiles purchased and put into service in 2010. The maximum deduction for light trucks and vans remains at $11,160.³

Section 179 expensing — The maximum deduction related to qualified Code Sec. 179 property doubled to $500,000 for tax years beginning in 2010 and 2011. The law also temporarily modified the definition of qualified Section 179 property to include up to $250,000 of qualified real property (qualified leasehold improvement property, restaurant property, and retail improvement property).⁴

Small-business income tax credits — The law extended the carryback period on general business tax credits to five years, and they can be applied to both regular tax liability and AMT tax liability.⁵

Start-up expense deduction — In 2010 only, start-up costs related to the creation of a new business can be expensed instead of having to be amortized. The maximum expense that can be claimed is $10,000.⁶

Self-employed tax break — In 2010 only, self-employed people are allowed to deduct their health insurance premiums before computing their payroll taxes.⁷

1) U.S. Small Business Administration, 2010
2–7) CCH, 2010

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