November 2010: A Note from Jeff Mack
Significant Tax Reductions Go Right to the Bottom Line

With the recent passage of the Small Business Jobs Act, most of the press was focused on the additional money and more flexible lending programs being made available for small businesses. The addition of approximately $60 billion in federal loans and the doubling of the maximum loan amounts for certain SBA programs are certainly noteworthy.

We all know that the last several years have placed tremendous strain on most small businesses, and that many have had to make do with their existing systems, technology, tools and infrastructure. As those critical components have aged, and as we begin to see signs of slowly coming out of the economic turmoil, many are now looking to shore up those legacy investments.

Equally important in the new Small Business Jobs Act are a number of significant tax reductions available to all of us. These tax incentives can now stretch your investment dollars much further than ever before. These are temporary measures, however, to kick start the recovery and help small businesses. Some of them are only in force through the end of 2010. Some others will remain in force through 2011. Either way, you will be doing yourself a favor to take advantage of these programs. Below are two specific tax reductions to be aware of.

Section 179: The bill increases for 2010 and 2011 the amount of investments that businesses would be eligible to immediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been $250,000 this year, and only $25,000 next year.

Extension of 50% Bonus Depreciation: The bill extends a Recovery Act provision for 50 percent "bonus depreciation" through 2010. The depreciation bonus allows businesses to make new investments today and know they can receive a tax cut for this year by accelerating the rate at which they deduct capital expenditures.

Depreciation Bonus at a Glance

• The Small Business Jobs Act (H.R. 5297) reinstated the 50 percent depreciation bonus for 2010
• Depreciation bonus helps businesses that cut their tax bill buy new equipment
• Applies, among other things, to purchases of tangible personal property (including construction, mining, forestry, and agricultural equipment) with a MACRS recovery period of 20 years or less
• Equipment must have been purchased and placed in service in 2010
• Applies to new equipment only
• Allowed for both regular and alternative minimum tax purposes
• Discretionary — Taxpayer need not claim the depreciation bonus
• Depreciation bonus will expire at the end of 2010

Sec. 179 Expensing at a Glance

• The Small Business Jobs Act increased Sec. 179 expensing levels to $500,000 for 2010 and 2011
• The phase-out threshold amount is $2 million
• New and used equipment is eligible for expensing
• Can be combined with depreciation bonus

 

These tax incentives can now stretch your investment dollars much further than ever before.