Legislation
includes increased IRC
Section 179 expensing
limits,
"bonus"
first-year
depreciation, changes
to treatment of small
business stock,
general business
credit, and health
insurance costs of
self-employed
individuals.
On September 27,
2010, President Obama
signed into law the
Small Business Jobs
Act of 2010 (H.R.
5297). Provisions
contained in the act
include:
Increased IRC
Section 179
expense limits --
Effective for 2010
and 2011, the
Small Business
Jobs Act increases
the maximum amount
that may be
expensed under IRC
Section 179 to
$500,000 and
increases the
phase-out
threshold amount
to $2 million. The
act also
temporarily
expands the
application of
Section 179 to up
to $250,000 of
certain real
property (e.g.,
qualified
restaurant
property).
First-year
"bonus"
depreciation
extended -- The
Small Business
Jobs Act extends
the additional 50%
first-year
depreciation
deduction that was
in effect for 2008
and 2009 for one
year, to qualified
property acquired
and placed in
service during
2010 (or placed in
service during
2011 for certain
long-lived
property and
transportation
property).
Small business
stock exclusion
increased -- The
act temporarily
increases the
exclusion
percentage for
qualified small
business stock to
100 percent, and
does not treat the
excluded gain as
an alternative
minimum tax
preference item.
Therefore, no
regular tax or
alternative
minimum tax will
generally be
imposed on the
sale of qualified
small business
stock issued and
acquired after
September 27,
2010, and before
January 1, 2011,
if the stock is
held for at least
five years.
General business
credit enhanced
for small
businesses --
Eligible small
businesses
(generally,
non-publicly
traded
corporations,
partnerships, or
sole
proprietorships
with gross
receipts of $50
million or less)
will be able to
carry back excess
general business
credits up to 5
years in 2010, and
will be able to
use the general
business credit to
offset both
regular and
alternative
minimum tax
liability.
Health insurance
costs will reduce
self-employment
tax -- For 2010
only, the
deduction allowed
to self-employed
individuals for
the cost of health
insurance for
themselves, their
spouses,
dependents, and
children who have
not attained age
27 as of the end
of the taxable
year will be taken
into account not
only for income
tax purposes, but
in calculating net
earnings from
self-employment
for purposes of
self-employment
tax
(Self-Employment
Contributions Act
"SECA"
taxes).
Cell phones no
longer listed
property --
Effective for tax
years ending after
December 31, 2009,
cell phones are
removed from the
definition of
listed property,
significantly
reducing the
substantiation
rules and
depreciation
limits that apply.
New reporting
requirements for
rental property
expenses -- With
some exceptions,
starting in 2011
individuals who
receive rental
income from real
property will be
required to file
an information
return (Form 1099)
when they make
payments totaling
$600 or more to a
service provider
(such as a
plumber, painter,
or accountant) in
the course of
earning rental
income.
Retirement plan
Roth availability
expanded --
Beginning in 2011,
governmental
457(b) plans will
be able to allow
participants to
make Roth
contributions.
Effective
immediately,
401(k) plans,
403(b) plans, and
governmental
457(b) plans can
allow participants
to roll over
pretax dollars
into a designated
Roth account under
the plan.
Portion of
nonqualified
annuity can be
annuitized --
Beginning in 2011,
a portion of a
nonqualified
annuity (an
annuity that is
not held by a
qualified
retirement plan or
IRA), endowment,
or life insurance
contract can be
annuitized,
provided the
annuitization
period is for 10
years or more, or
is for the lives
of one or more
individuals. The
portion of the
annuity or
contract that is
annuitized is
treated as a
separate contract
for purposes of
federal income
taxation, and the
investment in the
contract is
allocated on a pro
rata basis.
