Tax Changes Regarding : Enhanced small business expensing

On September 27, President Obama signed into law the “Small Business Jobs Act of 2010” (P.L. 111-240) which includes a number of important tax provisions for business. As we talk to our small business clients about their tax planning, we are helping them take advantage of these changes.

The first element of this new tax law is Enhanced small business expensing (Section 179 expensing).

This change helps small businesses quickly recover the cost of capital outlays.  Small business taxpayers can elect to write off these expenditures in the year they are made instead of recovering them through depreciation. Under the old rules, taxpayers could generally expense up to $250,000 of qualifying property—generally, machinery, equipment and software— placed in service in during the tax year. This annual limit was reduced by the amount by which the cost of property placed in service exceeded $800,000.

Under the Small Business Jobs Act, for tax years beginning in 2010 and 2011, the $250,000 limit is  increased to $500,000 and the investment limit to $2,000,000. The Small Business Jobs Act also makes certain real property eligible for expensing. Thus, for property placed in  ervice in any tax year beginning in 2010 or 2011, the $500,000 amount can include up to $250,000 of qualified leasehold improvement, restaurant and retail improvement property. ( This information provided by: © 2010 Thomson Reuters/RIA. All rights reserved.)

If you have questions about how you can incorproate this new tax benefit into your tax planning, please contact us today!