Small Business Jobs Act of 2010

The recently enacted 2010 Small Business Jobs Act includes many tax breaks and incentives for small businesses. Here’s an overview of some of the tax changes in the Act that might affect you and your business. The following provisions apply to all of 2010:

Increased limits on section 179 expensing – Taxpayers can now expense up to $500,000 in asset purchases for 2010 and 2011. Section 179 begins phasing when asset purchases exceed $2,000,000. Up to $250,000 of leasehold improvement property, restaurant property and retail improvement property can be deducted as part of the $500,000 limit.

Extension of 50% bonus depreciation – For new assets purchased in 2010, taxpayers can deduct 50% of the cost of those assets.

Increased deduction for start-up expenditures – Up to $10,000 in start-up costs are immediately deductible when taxpayers start a new business. Once the start-up costs exceed $60,000, the expense deduction begins phasing out.

Increased first year cap for automobile depreciation – The maximum amount allowed for depreciation (including bonus and section 179) for an automobile or light truck or van is $11,060.

Cell phones are no longer subject to listed property treatment – Cell phones were previously treated as listed property, where personal and business use was to be kept in a log. The new bill repeals this requirement and allows regular asset treatment of a cell phone.

Health insurance is now deductible for the purpose of calculating self employment income - For 2010, self employment tax will be calculated on self employment income after deduction for health insurance. Previously, the deduction for health insurance was taken on the taxpayer’s 1040 as an income adjustment, but was not deducted from business income to calculate self employment tax.

For rental property, new requirements for 1099 reporting go into effect in 2011 – Taxpayers who receive rental income will be required to file 1099’s with the IRS to report payments of $600 or more to service providers. This provision does not go into effect until January 1, 2011. With few exceptions, landlords will now have to request W-9’s from contract labor and other service providers in order to send 1099’s to lawn care, maintenance and repair, and utility providers if the landlord pays the service provider over $600 during 2011.

If you have any questions about the Small Business Jobs Act and how it might apply to your business, please contact Kelly Phillips at (501) 753-9700 for further information.