“The Small Business Jobs Act of 2010,” signed into law on September 27, creates several tax-saving opportunities for businesses. Here’s a summary of the key tax breaks.
* Section 179 deduction. The new law doubles the maximum amount that can be deducted for business equipment purchases to $500,000 annually for 2010 and 2011. Also, the dollar threshold at which the maximum deduction is phased out is increased from $800,000 to $2 million.
* Bonus depreciation. The new law revives the 50% bonus depreciation for qualified property placed in service in 2010 (through 2011 for certain property).
* Start-up expenses. For 2010, the maximum first year deduction for qualified costs of starting a business is increased to $10,000, with a $60,000 phase-out threshold.
* Qualified small business stock. Investors in “qualified small business stock” may be able to exclude 100% of the gain from the stock’s sale if it is held at least five years (for acquisitions from September 28, 2010, through December 31, 2010).
* Business credits. Normally, general business credits can’t offset alternative minimum tax (AMT) liability. The new law removes this restriction for an “eligible small business” and permits carrybacks of general business credits for five years.
* Health insurance. For 2010 only, self-employed individuals can deduct health insurance costs from their self-employment income in computing self-employment tax.
* Cell phones. The new law removes strict substantiation requirements for cell phones and similar devices used in business and treats employee use as a tax-free fringe benefit.
* Roth accounts. Participants in 401(k), 403(b), and 457(b) plans can now roll over funds to a Roth account. For rollovers in 2010, the resulting taxable income can be divided between 2011 and 2012.