Small Business Jobs Act of 2010


On September 27, 2010, President Obama signed into law the Small Business Jobs Act of 2010 (the “Act”) which includes

a number of tax breaks and incentives for businesses. The following is a brief overview of the most important tax changes in

the Act.

Tax Breaks and Incentives

Enhanced Small Business Expensing under Code Section 179. In some instances small business taxpayers can elect to write-off the cost of capital outlays in the year they are made in lieu of recovering these costs over time through depreciation. Prior to the Act, taxpayers could expense up to $250,000 of qualifying property - generally, machinery, equipment and certain software - placed in service in tax years beginning in 2010. This annual expensing limit was reduced by the amount by which the cost of qualifying property placed in service in tax years beginning in 2010 exceeded $800,000. Under the new law, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment ceiling to $2,000,000. In addition, the Act makes qualified real property eligible for expensing.

Extension of 50 Percent Bonus First Year Depreciation. Businesses are allowed to deduct the cost of capital expenditures over time according to depreciation schedules. For most new tangible personal property that was placed in service in 2008 and 2009, businesses were able to deduct capital expenditures by permitting the first-year write-off of 50 percent of the cost. The Act extends the first-year 50 percent write-off to apply to qualifying property placed in service in 2010 (as well as 2011 for certain property).

Boosted Deduction for Start-Up Expenditures. The Act allows taxpayers to deduct up to $10,000 in trade or business start-up expenditures for 2010. The amount that a business can deduct is reduced by the amount by which startup expenditures exceed $60,000. Previously, the limit of these deductions was capped at $5,000, subject to a $50,000 phase-out threshold.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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