Small businesses would receive a boost from legislation passed Wednesday by the U.S. House that would save small businesses $10.9 billion in taxes from 2006 through 2008, the Wall Street Journal reported. It is not clear how much support the measure has in the Senate.
The House's bill would extend a small business tax break that allows them to immediately write off up to $100,000 in capital purchases as a business expense. They can currently write off up to $100,000 but without congressional action, they can only expense up to $25,000 in capital expenses in 2006 and beyond.
The bill would phase in additional taxes over a period of years since a business can't expense a purchase and then deduct appreciation for the same item, the Journal reported. The law would enable the government to recover lost revenue within a decade.
The White House said the measure simplifies the tax code by "allowing these businesses to write off immediately the cost of this equipment for tax purposes rather than facing the difficulties of complying with the regular depreciation system."
Under the House measure, the current tax break would be enhanced to allow software purchases to count qualify as an expense, the Journal reported.
The bill also would index for inflation the $5 million or more in gross receipts limit at which company has to use the more complicated accrual accounting method as opposed to the cash-method of accounting.
Overall, small businesses can expect to save about $118 million over 10 years, according to the Joint Committee on Taxation, the Journal reported.