Oct 14, 2010

New Tax Breaks for Small Businesses

On September 27th, President Obama signed into law the Small Business Lending Fund Act of 2010. The law creates a lending fund for small businesses and also includes important tax breaks for small businesses. Some of the key tax breaks include:

Section 179 deduction increased. The Section 179 depreciation limit was increased from $250,000 to $500,000 for 2010 and 2011. Under this provision, small businesses can immediately deduct up to 100% of the cost of new or used equipment purchased in 2010 or 2011 up to the $500,000 limit. This includes any business items such as computers, trucks, machinery, and office furniture. The annual phase-out threshold for total equipment purchases was increased to $2,000,000.

Bonus depreciation extended. First-year bonus depreciation was extended for 2010 and 2011. This allows businesses to immediately deduct up to half of the cost of new business property purchased and placed in service in 2010 and 2011.

Start-up cost deduction increased. The start-up cost deduction for small businesses was increased from $5,000 to $10,000 for 2010 only. The phase-out threshold for the deduction was increased to $60,000 from $50,000.

New health insurance deduction for self-employed. When calculating their self-employment taxes and income, self-employed people can deduct the cost of health insurance they pay for themselves and their families (including their spouse, dependents, and any children under age 27).

Cell phones no longer listed property. Beginning with tax year 2010, cell phones are no longer considered "listed property" for IRS purposes. This means cell phones can be deducted without the burdensome documentation required for listed property.

For more information, see the White House press release on the new tax law.