On September 27, 2010 President Obama signed into law the Small Business Job Act of 2010. Over 90% of the new jobs created each year in the U. S. come from small businesses. The legislative acts included in the bill go into effect immediately and include tax cuts and improved access for credit.

Listed below are several new small business tax cuts, designed to provide immediate incentives to stimulate business investment and create to jobs:

Health insurance cost deduction allowed in 2010 in the calculation of self-employment tax

A self-employed individual may deduct the costs of health insurance premiums (for 2010 only) for themselves, their spouses, and dependents in the calculation of the self-employment tax.

Simplification for cell phone deductions

The new law removes cell phones from their current classification of ‘listed property’. Further, the new law allows the fair market value of the personal use of cell phones provided to an employee used primarily for business purposes to be excluded from income.

Deduction increase for start-up expenses

For 2010 only, the deduction increases from $5,000 to $10,000 and increases the phase out threshold to $60,000.

Extension of 50% bonus depreciation

The extension of this cut lasts through 2010 and encourages the immediate investment in capital expenditures.

Extension and expansion of Sec 179 Expensing

The bill increases, for tax years 2010 and 2011, the amount of capital investments that businesses can write off to $500,000, while raising the investment limit to $2 million. In addition, a taxpayer can elect up to $250,000 of the $500,000 section 179 deduction limit for ‘qualified real property’.

Zero taxes on capital gains from ‘key’ small business investments

The Small Business Jobs Act puts in place a provision raising the 75% exclusion of gain on qualified small business stock to 100% for the rest of 2010.

Five-year carry back of general business credits

The new law extends the carry back period for eligible small business credits to five years. Also these credits may offset the Alternative Minimum Tax.

Limitations on penalties for errors in tax reporting

Beginning this year, the bill changes the Code Sec 6707A penalty for failing to report certain tax transactions from a fixed dollar amount to a percentage of the tax benefits from the transaction. This action eliminates the disproportionately large penalty on a small business in certain circumstances.

Additionally, the Small Business Job Act of 2010 provides for improved access to credit by extending successful SBA recovery loan provisions, doubles the maximum loan size for the largest SBA programs, creates a new $30 billion small business lending fund and creates an initiative to strengthen innovative state small business programs.

For help in understanding how the Small Business Job Act of 2010 can benefit your company, please do not hesitate to contact Heintzelman Accounting Services, Inc.