Among other things, the Small Business Jobs and Credit Act of 2010 will:
- Increase the tax write-off for certain capital expenses.
- Allow small businesses to carry back certain tax credits for five years, rather than one, and count those credits against their Alternative Minimum Tax (AMT) liability.
- Allow individuals to exclude 100% of their gain on the sale of qualified small business stock acquired since the bill was signed.
- Allow the self-employed to deduct the cost of health insurance in calculating their self-employment tax.
- Double the deduction for start-up expenditures, from $5,000 to $10,000.
The new law will increase Section 179 expensing from $250,000 to $500,000 on qualifying property purchases up to $2 million – including up to $250,000 on certain leasehold, retail and restaurant improvements. It also extends the 50% first-year depreciation of tangible personal property acquired and put in place in 2010. By writing off a bigger chunk immediately, rather than over time through depreciation, small businesses should be able to recover certain costs more quickly and thus have more money at their disposal.
The Small Business Jobs and Credit Act also aims to increase the amount of capital that is available for small businesses. Because taxpayers will be able to exclude 100% of their gain from selling small business stock, small businesses should be more attractive to investors. And in addition to the tax incentives, the bill will funnel up to $30 billion toward community banks, with incentives for those banks to lend to small businesses.
The federal government will pay for the loans through various tax-revenue offsets, including requiring information reporting for rental property expense payments and allowing more conversions of retirement accounts into Roth accounts.
For more information on the new law, click here or contact your Barnes Dennig representative.