There are three significant tax breaks for small businesses in the Hiring Incentives to Restore Employment (HIRE) Act signed into law this week.
Payroll tax credit: Under the Act, businesses do not have to pay their share of Social Security taxes (6.2%) on wages paid to qualifying new hires. Qualifying new hires include anyone hired to a new position after February 2, 2010 and before January 1, 2011 who has been unemployed for at least 60 days or only working part-time. Workers hired to fill existing positions qualify only if the worker they are replacing left voluntarily or for cause.
Business tax credit: For qualifying new hires, small businesses can also claim an additional general business tax credit of up to $1,000 per worker on their 2011 tax returns provided the worker stays employed for at least a year.
Section 179 deductions: The HIRE Act extends the American Recovery and Reinvestment Act provisions that allow small businesses to deduct up to $250,000 of the cost of qualifying property in the year purchased (with a phase-out for expenditures over $800,000). Without this new legislation, the Section 179 deduction was scheduled to go down to approximately $133,000 in 2010. The extended higher limits apply for any qualifying property purchased during the 2010 tax year.