It’s just in time for year-end tax planning: the Small Business Jobs Act, a new law that extends some federal tax breaks and enhances others.
- Section 179. You can immediately write off up to $500,000 of assets (including computer software) that you buy for your business. The phase-out threshold — that is, the total-assets-purchased dollar point when your deduction starts to shrink — is $2 million.The new law also expands the type of property you can elect to expense. For this year and next, you can use Section 179 to expense purchases of qualified leasehold, restaurant, and retail improvements, up to a maximum of $250,000.
- Bonus depreciation. In addition to the expanded Section 179 deduction, you can elect to write off additional first-year depreciation of 50% of the cost of assets you purchase for your business in 2010.
- Start-up expenditures. This year you can deduct up to $10,000 of costs you incur to get a new business off the ground. You get the full deduction when total start-up costs are less than $60,000, and a reduced benefit for amounts over that.
- Self-employment tax deduction. For 2010, you can subtract the cost of health insurance premiums when computing your federal self-employment tax. Before this change, the deduction applied only to income tax.
The new law also increases the carryback period for business credits, authorizes Roth IRA rollovers for 401(k), 403(b), and 457(b) retirement plans, and changes the rules for excluding gain on small business stock sales.
Please call for details on how the new law could affect your business.