Small Business Jobs Act of 2010: Stimulus for Small Businesses
H.R. 5297 as signed into law on September 27, 2010, contains a number of important tax provisions for small and mid-sized businesses. With proactive planning, these new provisions can save businesses significant tax dollars.
Increased Section 179 Expensing
For tax years beginning in 2010 and 2011, up to $500,000 of non-real estate assets may be expensed in the current year rather than being depreciated over a period of years. This deduction is phased out dollar-for-dollar when purchases exceed $2,000,000. Both new and used assets qualify for this deduction.
For tax years beginning 2010 and 2011, up to $250,000 of qualified real estate property (including leasehold improvements, restaurant property, and retail improvement property) may be expensed under Section 179.
One Year Extension of 50% Bonus Depreciation
The Small Business Jobs Act of 2010 extends 50% bonus depreciation until the end of 2010. This allows you to expense one half of the purchase price of non-real estate assets in the current year and depreciate the remaining half over a period of years. Only new assets qualify for bonus depreciation.
Carryback of General Business Credits for Eligible Small Businesses
For general business credits generated in 2010, the carryback period for Eligible Small Businesses (ESBs) is extended from the first preceding tax year to the five preceding tax years. ESBs are privately-held businesses that have less than $50 million in average gross receipts over the last three years.
ESB General Business Credits Not Subject to AMT Limitations
Previously, general business credits could only be used to offset regular taxes. The Small Business Jobs Act of 2010 changed the law to allow general business credits to offset both regular and alternative minimum taxes. This change makes the credits more widely applicable.
5 Year Recognition Period on Built-In Gains Tax on C to S Corporation Conversions
The recognition period for built-in gains is shortened from ten years to seven years for tax years 2009-2010. For tax years beginning in 2011, the built-in gain recognition period is further shortened to five years.
Retirement Plan Rollover into Roth Account
If an employer offers a post-tax Roth option for retirement savings, eligible pre-tax 401(k), 403(b), or governmental 457(b) plans may be rolled over into similar Roth accounts during 2010 only. Taxable rollover amounts may be taken into income either fully in 2010 or equally over two years in 2011 and 2012.
While this is a summary of the most widely applicable tax changes, there are numerous other tax provisions contained within this bill. For more information, please contact Brendan McAuliffe, CPA, at (425) 289-7644 or firstname.lastname@example.org.