Small Businesses Job Act of 2010

The following is a brief overview of the key tax changes affecting businesses in the recently enacted Small Business Jobs Act of 2010. Please call our offices for details of how the new changes may affect your specific situation.

Enhanced small business expensing (Section 179 expensing):

• To help small businesses quickly recover the cost of capital outlays, small business taxpayers can elect to write off these expenditures in the year they are made instead of recovering them through depreciation.
• Under the Small Business Jobs Act, for tax years beginning in 2010 and 2011, taxpayers can generally expense up to $500,000 (up from $250,000) of qualifying property—generally, machinery, equipment and software—placed in service in during the tax year.
• This annual limit is reduced by the amount by which the cost of property placed in service exceeds $2,000,000 (up from $800,000).
• The Small Business Jobs Act also makes certain real property eligible for expensing. Thus, for property placed in service in any tax year beginning in 2010 or 2011, the $500,000 amount can include up to $250,000 of qualified leasehold improvement, restaurant and retail improvement property.

Extension of 50% bonus first-year depreciation.The Small Business Jobs Act extends the first-year 50% write-off to apply to qualifying property placed in service in 2010 (as well as 2011 for certain aircraft and long production period property).

Boosted deduction for start-up expenditures.The Small Business Jobs Act allows taxpayers to deduct up to $10,000 (up from $5,000) in trade or business start-up expenditures for 2010. The amount that a business can deduct is reduced by the amount by which startup expenditures exceed $60,000 (up from $50,000).

100% exclusion of gain from the sale of small business stock.Under the Small Business Jobs Act individuals can exclude 100% (up from 75%) of the gain from the sale of qualifying small business stock that is acquired in 2010 after September 27, 2010 and held for more than five years.

General business credits of eligible small businesses for 2010 get five-year carryback.Currently, a business's unused general business credits can be carried back to offset taxes paid in the previous year, and the remaining amount can be carried forward for 20 years to offset future tax liabilities.

General business credits of eligible small businesses not subject to AMT for 2010.The Small Business Jobs Act allows eligible small businesses to use all types of general business credits to offset their AMT in tax years beginning in 2010.