This week Congress passed the Small Business Jobs Act of 2010. It did several things, although it did not address the highly anticipated sunset of the income tax, estate tax and alternative minimum tax rules enacted in 2001 by President Bush. Looks like we will need to wait until after the election to see if these rules might change at that time.
The new Act does attempt to stimulate some spending by businesses – two accelerated write-offs for businesses can flow directly to the bottom line.
The first changes the “Section 179″ depreciation for 2010 and 2011. This deduction permits an immediate deduction of certain business expenses that would otherwise be deducted over several years. For 2010 and 2011, small businesses can immediately deduct up to 100% of the cost of up to $500,000 of new or used equipment such as computers, delivery trucks and machinery. Interestingly, 2010 is almost over, so it seems that Congress is hoping that small businesses will elect to spend significant amounts during the last quarter of 2010 in order to capture this tax benefit this year.
Another benefit includes being able to deduct as much as $250,000 of the $500,000 depreciation amount for leasehold improvements to property. Lawmakers think that this might help to stimulate the building trades.
Businesses of any size also can get a “bonus” deduction for 2010 and 2011. This provision allows immediate write-offs for up to one-half of the remaining cost of qualified new equipment. Bonus depreciation may also be used to claim a refund if a business is losing money as compared to a Section 179 deduction that helps only to reduce taxable income (to zero but not below).
