Friday, November 19, 2010

Small Business Jobs and Credit Act of 2010 Primer

The Congress recently passed legislation, the Small Business Jobs and Credit Act of 2010, that can benefit small businesses if they act quickly. Let me run down the major provisions:

Bonus Depreciation: It behooves any business considering any depreciable purchases to do so before December 31st as they will be able to deduct 50% of the cost right away. This applies to assets with useful lives of 20 years or less.

General Business Credits Carry Back Period Extended: The carry back period for the general business credits has been extended to five years. The credits can be used to offset taxes from previous years, including the Alternative Minimum Tax.

Capital Gains Relief: Capital gains tax on investments in small businesses have been eliminated entirely if held for at least five years. A small business is categorized as a company with $50,000,000 or less in assets and performs a qualified trade or business.

Section 179 Expensing Increase: Section 179 is the IRS tax code that allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the full purchase price from your gross income, instead of having to depreciate it over the useful life of the equipment. The Section 179 limit has been increased from $250,000 to $500,000 and will continue through 2011.

Expanded List of Section 179 Property: Leasehold, restaurant or retail improvements can be expensed up to $250,000 through 2011.

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