There are some important tax law changes affecting small businesses this year. If unaware of these earlier, it’s not too late to take advantage of the tax savings, using amended returns if needed. As with all new tax laws, the “fine print” is extensive, and business owners should consult with their tax professional for guidance.
Businesses who hire unemployed workers this year are eligible to save the 6.2 percent employer share of Social Security taxes on the employee’s wages. This reduction has no impact on the employee’s future Social Security benefits, and it gives a substantial incentive to hire formerly unemployed workers.
The savings are boosted by an additional tax credit of $1000 if those workers remain fully employed for 52 weeks after being hired.
Another major change available just for this year is the self-employed health insurance premiums against Social Security self-employment taxes deduction. The self-employed have been able to deduct health insurance against their regular income taxes, but not Social Security taxes, for years.
For a family paying $500 per month for health insurance, the annual tax savings amounts to about $840. There is also a new tax credit for small businesses that provide health insurance to their employees earning under $50,000 per year – check with a tax professional if this applies personally.
Other provisions include an increased “one year expensing allowance” of $500,000 this year, including up to $250,000 for leasehold improvements and qualified restaurant and retail improvement property.
The 50 percent bonus depreciation deduction has also been extended for 2010. These two provisions benefit companies who may have invested in new equipment or building improvements in 2010.
Business auto depreciation has also been increased for new cars by $8000 this year to $11,060 for the first year deduction. And, to encourage new entrepreneurs, the deduction for “start up expenses” has been increased from $5000 to $10,000 this year.
“These are just a few of the new tax provisions affecting businesses in 2010,” said Anne Geisler, a tax practitioner in Damariscotta. “There are specific eligibility requirements that employers and employees must meet for these savings, so business owners should ask their tax advisor for guidance.
“Small business is the backbone of Lincoln County’s economy, as it is in many areas across the country, and the government recognizes that small business may be the driving force leading us out of this recession, so Congress and President Obama are trying to encourage entrepreneurship and business expansion efforts.”
