Below are several highlights of the Small Business Job
s Act of 2010. Keep in mind that this is a brief summary of the Small Business Jobs Act. If you think any of these provisions apply to
you, please contact us at 516-791-1303.
Bonus Depreciation - The 50 percent first-year bonus
depreciation, which had originally expired at the end of 2009, has been
extended through December 31, 2010. This
is retroactive to January 1, 2010.
Code Sec. 179 Expensing - Eligible taxpayers may elect to claim
a Code Sec. 179 expense deduction on qualified property purchased. Under current law, the maximum deduction for
2010 is $250,000. The dollar limit is
reduced by the amount by which the cost of qualifying property placed in
service during the year exceeds $800,000. For 2011, the expensing limit had been scheduled to revert to prior
levels of $25,000 and $200,000 respectively. The new law increases the maximum deduction to $500,000 and the
investment limit to $2 million for tax years beginning in 2010 and 2011.
S Corp Built-in-Gain Period - A C corporation that converts to
an S corporation generally must hold any appreciated assets for 10 years
following the conversion or, if disposed of earlier, pay tax on the
appreciation at the highest corporate level rate. The American Recovery and Reinvestment Act of
2009 temporarily shortened the 10-year holding period to seven years for
dispositions beginning in 2009 and 2010. The new law further shortens the holding period to five years for
dispositions in any tax year beginning in 2011, if the fifth year in the
recognition period precedes the tax year beginning in 2011.
Extended Carryback of General Business Credit - The new law
extends the carryback period for eligible small business credits to five years,
effective for credits determined in the taxpayer's first tax year beginning
after December 31, 2009.
Qualified Small Business Stock - The 2009 Recovery Act
temporarily increased the Code Sec. 1202 percentage exclusion for qualified
small business stock sold by an individual from 50 percent to 75 percent for
stock acquired after February 17, 2009 and before January 1, 2011, and held for
more than five years. The new law raises
the exclusion to 100 percent for gain on stock acquired after the date of
enactment of the bill and before January 1, 2011. The five year holding period continues to
apply.
Start-Up Expense Deduction - Taxpayers have generally been able
to deduct up to $5,000 in qualified trade or business start-up expenses,
reduced by the amount of the total start-up expenses that exceed $50,000. The new law raises the deduction limit to
$10,000 and increases the phaseout threshold to $60,000, for 2010 only.
Self-Employment Income - A self-employed individual can take a
deduction for health insurance costs paid for the individual and his or her
immediate family for income tax purposes. Under the new law, the deduction for the cost of health insurance is
allowed in calculating net earnings from self-employment for purposes of
self-employment taxes. The provision
applies to tax years beginning after December 31, 2009.
401(k) Rollovers to Roth Accounts - The new law authorizes
401(k), 403(b) and 457(b) governmental plans to allow participants to roll over
qualified distributions, including in-service distributions, into a designated
Roth account within their plans. The
rollover will be taxable, except for any after-tax contributions. The provision is effective for distributions
after September 27, 2010. If an amount
is rolled over in 2010, the amount is included ratably in income in equal
amounts in 2011 and 2012, unless the taxpayer elects otherwise.
Every tax bill offsets its tax breaks with revenue raising
provisions that are not quite so "friendly". Some of these provisions are as follows:
Information Reporting on Rental Property Expense Payments - The
new law requires qualified individuals receiving rental income from real
property to file information returns with the IRS and to service providers
reporting payments of $600 or more during the year for rental property expenses. This applies to payments made after December
31, 2010.
Higher Failure-To-File Penalties on Information Returns - The
new law substantially increases the penalties for failing to timely file
information returns with the IRS and to payees.