Do You Know the 8 Tax Breaks in the Small Business Jobs Act?

  

Eight New Small Business Tax Cuts – Effective Today, Providing Immediate Incentives to Invest:   The President had already signed into law eight small business tax cuts, and on Monday, he signed into law another eight new tax cuts that go into effect immediately.

 
1.       Zero Taxes on Capital Gains from Key Small Business Investments:
Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily puts in place for the rest of 2010 a provision called for by the President – elimination of all capital gains taxes on these investments if held for five years. Over one million small businesses are eligible to receive investments this year that, if held for five years or longer, could be completely excluded from any capital gains taxation.
 
2.        Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments:
The bill increases for 2010 and 2011 the amount of investments that businesses would be eligible toimmediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been $250,000 this year, and only $25,000 next year.  This provision means that 4.5 million small businesses and individuals will be able to make new business investments today and know that they will earn a larger break on their taxes for this year.
 
3.       Extension of 50% Bonus Depreciation:
The bill extends – as the President proposed in his budget – a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investmentstoday and know they can receive a tax cut for this yearby accelerating the rate at which they deduct capital expenditures.
 
4.         A New Deduction of Health Insurance Costs for Self-Employed:
The bill allows 2 million self-employed to know that on their taxes for this year, they can get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.
 
5.       Tax Relief and Simplification for Cell Phone Deductions:
The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation – making it easier for virtually every small business in America to receive deductions that they are entitled to, beginning on their taxes for this year.
 
6.        An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses:
The bill temporarily increases the amount of start-up expenditures entrepreneurs can deductfrom their taxesfor this yearfrom $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.
 
7.       A Five-Year Carryback Of General Business Credits:
The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes – providing them with a break on their taxes for this year– while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.
 
8.       Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business:
The bill would change, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount – which was criticized for imposing a disproportionately large penalty on small businesses in certain circumstances – to a percentage of the tax benefits from the transaction.
 
For more information on the eight tax breaks for small businesses as enacted in the Small Business Jobs Act of 2010, please see the article, "Tax Provisions of Small Business Jobs Act of 2010: Small Business Jobs Act's Eight Tax Breaks for Small Businesses".
 

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The Barefoot Accountant—is a Certified Public Accountant, Certified QuickBooks ProAdvisor,  operating an accounting, tax, and QuickBooks consulting firm in Berlin, Connecticut, Accountants CPA Hartford, Connecticut, LLC.  Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission.  Bill is a crazed animal lover, feeding birds, squirrels, chipmunks, skunks, possums, stray cats, and any two-legged or four-legged critter traversing through his yard.  His backyard in Berlin, Connecticut has been certified as a habitat suitable for wildlife by the National Wildlife Federation.

Bill also writes an Accounting, QuickBooks, and Tax blog:  Accounting, QuickBooks, and Taxes by the Barefoot Accountant.  For entertaining articles, please see his listing at The Amazing Brighenti.

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