The New Small Business Law

On September 27, 2010, the President signed a new small business bill into law.  A large part of the bill concentrates on increasing the maximum loan size from $2 million to $5 million on 504 SBA loans to small businesses.  The bill also includes tax breaks to help struggling small businesses.  The following are some of the tax breaks that may affect you and your company.

$500,000 Section 179 Depreciation Limit – Current law allows taxpayers to expenses $250,000 in capital expenses that would otherwise have to be recovered through depreciation deductions.  The bill raises the Section 179 limit to $500,000, with the deduction phasing out dollar-for-dollar as capital expenditures exceed $2 million.  This applies to taxable years beginning in 2010 and 2011.

The bill also extends the Section 179 deduction to three classes of real estate; this is the first time any real estate assets have qualified.  It will apply to the three classes of property only up to $250,000 that had been eligible for 15 year depreciation: “qualified restaurant property,” “qualified leasehold improvements,” and “qualified retail improvement property.”

Extended Bonus Depreciation – The current provision allowing taxpayers buying new property to deduct half the cost in the first years of service had expired at the end of 2009.  The bill extends bonus depreciation through 2010.

Five Year Carryback – The bill allows taxpayers who have “general business credits” (for example, research credits and job credits,) to carry them back five years.

Deduction for Health Insurance in Calculating 2010 SE Tax – For 2010 only, taxpayers with self-employment tax will get to reduce their self-employment income by their deductible self-employed health insurance.

Start-up Expenditures – The bill increases the $5,000 limit for deductible start-up expenditures to $10,000 for 2010 only.

If you have any questions regarding the new tax breaks, please contact Jim Downey at 800-849-6022 or jdowney@downeycocpa.com.