Mar 24, 2010

New Tax Benefits for Small Businesses Under the HIRE Act

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.