President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act) on December 17, 2010, finally giving taxpayers some certainty for short-term tax planning.However, most of the provisions will expire within two years, so this is not a permanent solution.Last week we focused on provisions that impact individuals. Today we will cover highlights for businesses.
Bonus Depreciation:Earlier this year, the 2010 Small Business Jobs Act extended the 50-percent bonus depreciation through the end of 2010 for qualified property.The Tax Relief Act increased the bonus amount to 100 percent for assets placed in service after September 8, 2010, and before January 1, 2012.For assets placed in service after December 31, 2011 and before January 1, 2013, the bonus depreciation will be 50 percent.
Section 179 Expensing: The 2010 Small Business Jobs Act increased the Section 179 dollar limit to $500,000 and the total asset investment limit to $2 million for tax years beginning in 2010 and 2011.The 2010 Tax Relief Act set the dollar limit at $125,000 for tax years beginning in 2012, and the total asset investment limit to $500,000 for that year.
Research Tax Credit:The Tax Relief Act extended the research tax credit through December 31, 2011.
Small Business Stock: The 2010 Small Business Jobs Act had previously enhanced the 100 percent exclusion of gain on the sale of qualified small business stock, but the purchase dates of the stock had to fall after September 27, 2010, and before January 1, 2011.The Tax Relief Act extended the purchase date one more year to January 1, 2012.In order for the stock to qualify, it must be held at least five years, it must be issued by a C corporation with assets of $50 million or less at the stock issuance date, and the purchaser (taxpayer) cannot be a C corporation.In addition, the exclusion is limited to the greater of $10 million or 10 times the taxpayer's basis in the stock.
Work Opportunity Tax Credit: The Tax Relief Act extended the Work Opportunity Tax Credit (WOTC) for employers who hire individuals in certain groups, with a hire date before January 1, 2012.This credit will not include unemployed veterans or disconnected youth who are hired after 2010.
Payroll tax cut:The Tax Relief Act reduces the employee's share of Social Security taxes by 2% for calendar year 2011 only.The employer will still pay the full 6.2% portion, but the employees will pay 4.2% in 2011. Self-employed individuals will pay 10.4% on self-employment income rather than 12.4%.
Extenders:Many tax incentives that had expired at the end of 2009 were extended two years by the Tax Relief Act.Some of the extenders include:
New Markets Tax Credit (modified)
Railroad track maintenance credit
Differential wage credit
15-year depreciation for qualified leasehold improvements, restaurant building and improvements, and retail improvements
Film/television production costs
Five-year write-off of farm machinery & equipment
Tax incentives for empowerment zones
Credits for biodiesel and renewable diesel fuel
Energy efficient home credit for qualified builders
Percentage depletion for oil and gas from marginal wells
