For many small business owners, being able to find every advantage is important — especially during tough economic times.
What many small business owners don’t realize, though, is that there are some provisions that help them save with their businesses.
The Small Business Jobs Act of 2010 provides you some opportunities to reduce your tax liability, saving money for your business.
If you qualify for the provisions in this law, the money you save can be used to go back into your business, helping you grow. Plus, the tax breaks can help you stay afloat when you are struggling.
Here are some of the ways the Small Business Jobs Act of 2010 can help your business:
Treating Section 179 Property as an Expense
Certain property, often called Section 179 property, can be depreciated as a capital expenditure.
This, however, is less valuable to a small business than considering the property as an expenditure. The Small Business Jobs Act of 2010 increases the expensing limits for this type of property.
During tax years 2012 and 2013, you can claim more as an expense, and that can improve your tax liability, and save you money. Make sure you attach a Form 4562, and follow the instructions for expensing your Section 179 property.
First-Year Depreciation for Some Property
A lot of the provisions in the Small Business Jobs Act of 2010 are meant to help business make purchases that can help the economy, while at the same time making it more affordable for small businesses to improve their growth.
One of these provisions is the ability to see an additional first-year depreciation of 50% for certain types of property.
This bonus depreciation provides some helpful savings for particular types of property. You get the bonus depreciation of 50% of the basis for property put into use after December 21, 2011 and before January 1, 2013. This only applies to the first year the property is in use.
However, there is a better depreciation bonus of 100% that can affect your small business taxes if you put the property into service between September 8, 2010, and January 1, 2012. So, if you bought qualifying property last year, you can get a bonus depreciation deduction for the taxes you are paying this year. Any business tax deduction can be a good thing.
Bigger Deduction for Start-Up Expenses
Small business start-ups see a lot of expenses.
In the past, the deductions for these expenditures has been somewhat limited, since the deduction was only $5,000.
That can lead to difficulties in ensuring that you have the equipment and other items that you need for a successful business. The Small Business Jobs Act of 2012 increases the deduction you can take for start-up expenses.
This is a great boon for many.
You can get a deduction of up to $10,000 for start-up expenses. And, if your start-up expenditures are beyond $60,000, a dollar for dollar reduction of the $10,000 is required.
This can be a great way to reduce the burden on small business when it comes to start-up costs. This deduction is considered an “Other Deduction,” whether you are filing a 1120, 1120S, or 1065 Form. On the Schedule C or F, you should consider it as “Other Expense.”
Better Cell Phone Deductions
One of the difficulties in the past has been the fact that cell phones have been considered property — much like computers.
This has led to annoying reporting difficulties for employers and employees, meaning that records had to be kept of business usage vs. personal usage.
Additionally, cell phones were treated as property and subject to depreciation as its deduction. Now, thanks to the Small Business Jobs Act of 2010, it’s possible to consider cell phones as an expense, and employees no longer have to record all their usage. You can expense company-paid cell phones for staff, as well as expense your own cell phone as long as the personal use on it is minimal.
This means you get a better deduction, and you can use the savings for other purposes.
Small Business Health Care Tax Credit
It’s also worth noting that you can also receive a small business health care tax credit.
This isn’t part of the Small Business Jobs Act of 2010, but it’s still important, and can save you money.
You are eligible for the tax credit, which can help you save money, if your company meets the following conditions:
- Cover at least 50% of the cost of single health care coverage for each employee.
- Fewer than 25 full-time equivalent employees.
- Full-time equivalent employees must make, on average, less than $50,000 a year.
This tax credit can be beneficial to your business by providing a credit, while at the same time allowing you to provide benefits that will attract quality workers to your company.
As you plan your business finances for the coming year, make sure that you consider the provisions that can save your business money. Consultation with a knowledgeable tax professional can help you better improve your tax efficiency and save money for your business.