With intentions of bolstering the economy with new job opportunities, President Obama recently signed the Small Business Jobs Act of 2010 into law. The administration hopes that by helping businesses to swiftly recover the capital loss from new equipment expenditures, these businesses will have the funds to grow and provide jobs.
Many business owners who acquire equipment for their business typically prefer to deduct the cost in a single tax year, as opposed to deducting smaller amounts over a number of years. The deduction that makes this possible is referred to as a Section 179 deduction. Under this tax provision, if your business spends less than $2,000,000 a year on qualified equipment, you can write off up to $500,000 in 2010 and 2011. The stipulations of this deduction were designed for small businesses. To ensure small businesses receive these benefits, the $500,000 deduction phases out when a business purchases more than $2,000,000 in one year.
Some additional benefits of the Small Business Jobs Act of 2010 include:
- Section 179 expensing will increase to $500,000 for qualified property.
- Software will continue to be eligible for full Section 179 expensing.
- Leasehold improvements, restaurant property and retail property may be expensed up to $250,000.
- Certain passenger automobiles have an increased depreciation of $8,000 in the first year. This means that automobiles are allowed $11,060 and vans and small trucks are allowed $11,160.
- Companies who offered their employees cell phones as a fringe benefit are now able to deduct the costs of those phones when they are used for valid business purpose.
- Taxpayers will have access to their Section 179 election without the permission of the IRS.
- The Small Business Jobs Act of 2010 extends 50% first year bonus depreciation and AMT depreciation on new property through the end of the year. This extension in retroactive through January 2010.
The Section 179 deduction can be made on Form 4562 for the tax year the property was placed in service. Section 179 property is property that you acquire by purchase for use in the active conduct of your business. Business owners can expense the total cost of property for any tax year, but it cannot exceed the total amount of taxable income during that tax year. Small businesses can make the most of Section 179 through Non-Tax/Capital Leases. To find out your tax savings, and the true cost of your equipment acquisition, use our Tax Savings Lease Calculator. As a reminder, to take advantage of the 2010 and 2011 tax incentives, your business equipment must be put in use by year-end. Each company should contact their tax adviser to learn more about how you can make these deductions work for your company.
The Small Business Jobs Act of 2010 allows businesses to compete and grow. Contact your tax adviser or Tiger Leasing for more information on Section 179, equipment leasing, and personalized leasing options for your company.