Fourth Quarter , 2010

On September 27, 2010, President Obama signed the Small Business Jobs Act, including valuable business and individual tax incentives. Many of the $12 billion in tax incentives are temporary, while others are permanent and may require careful planning to maximize the tax benefit.

Some key tax incentives include:

  • Bonus Depreciation. An additional first year depreciation deduction equal to 50% of the adjusted basis will be available for property placed in service during 2010 and 2011.
  • Code §179 Expensing. For tax years 2010 and 2011, the maximum amount a taxpayer may expense under Code $179 is $500,000 with a phase-out threshold of $2 million.
  • Start-up Expenditures. The new law increases the amount of start-up expenditures a taxpayer may deduct from $5,000 to $10,000 for tax years beginning in 2010 and increases the deduction phase out threshold to $60,000.
  • S-Corporation Built-in Gains Tax. During 2011 the built-in gains tax will not apply to S corporations which have exceeded five or more years of thirteen-year built-in gains period in 2011.
  • Code Section 280F. During 2010, the maximum first year depreciation for passenger vehicles increased to $11,060.
  • Cell Phones. Deductions are not allowed for “listed property” unless a taxpayer can substantiate business use, and the new law removes cell phones and similar telecom communications devices from the definition of listed property for tax years beginning after December 31, 2009.
  • Small Business Stock. The new law raises the gain exclusion to 100% for qualified small business stock, such that there will be no gain on the sale of qualified small business stock issued between September 27, 2010 and January 1, 2011, provided the taxpayer holds the stock for a period of 5 years.
  • Designated Roth Accounts. The tax amounts due from an IRA rollover under a 401(k), 403(b) or governmental 457(b) from a non-designated Roth account to a designated Roth account within the same plan during 2010 will be included ratably in income for 2011 and 2012 unless the taxpayer elects otherwise.
  • Self-employment. The new law allows self-employed individuals to deduct the most of health insurance for self employment taxes. The provision only applies to the self-employed taxpayer’s first tax year beginning after December 31, 2009.
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