Tax Changes in the “Small Business Jobs Act of 2010″
In addition to these tax changes, a number of provisions were designed to increase the availability of loan funds for small business.
Section 179 Expensing and Bonus Depreciation.
The bill increases the maximum amount a taxpayer may expense under IRC § 179 to $500,000 and increases the phaseout threshold amount to $2 million for tax years beginning in 2010 and 2011. The first-year 50% bonus depreciation available under IRC § 168(k) is extended for one year to apply to property acquired and placed in service in 2010 (or 2011 for certain long-lived and transportation property). The bill also allows taxpayers using the percentage-of-completion method to take into account the cost of qualified property as if bonus depreciation had not been enacted.
The bill removes cell phones from the definition of listed property. Thus, the heightened substantiation requirements and special depreciation rules that apply to listed property under IRC § 280A will no longer apply to cell phones. However, the Joint Committee on Taxation notes that this change “does not affect Treasury’s authority to determine the appropriate characterization of cell phones as a working condition fringe benefit under section 132(d) or that the personal use of such devices that are provided primarily for business purposes may constitute a de minimis fringe benefit, the value of which is so small as to make accounting for it administratively impracticable, under section 132(e).”
The carryback period for eligible small business credits under IRC § 38 is extended from one to five years. The bill also allows taxpayers to use eligible small business credits to offset both regular and alternative minimum tax liability. Both provisions are effective for credits determined in tax years beginning after 2009.
Self-Employed Individuals’ Health Insurance
The bill allows self-employed individuals who deduct the cost of health insurance for themselves and their spouses, dependents, and children under 27 years old as of the end of the tax year to take the deduction into account in calculating net earnings from self-employment for purposes of SECA taxes. This provision applies to the taxpayer’s tax years beginning after 2009.
The bill increases the section 195 deduction for trade or business startup expenses from $5,000 to $10,000 for tax years beginning in 2010 and 2011. The start of the limitation on the deduction is increased from $50,000 to $60,000. So for 2010 and 2011 the amount of the deduction is the lesser of (1) the amount of the startup expenses or (2) $10,000, reduced (but not below zero) by the amount by which the startup expenditures exceed $60,000.