health insurance

The Small Business Jobs Act

Glenn G. Schanel, CPA

The Small Business Jobs Act of 2010 (“the Jobs Act”) was signed into law on September 27, 2010. The legislation contains a number of tax benefits for small and large businesses affecting the 2010 and 2011 tax years, as well as several changes for individuals.

Section 179 Expensing

Generally, taxpayers must recover the cost of assets used in a trade or business or for the production of income through annual depreciation deductions on their tax returns over several years. Under Section 179, if certain conditions are met a business can expense the cost of a capital asset in the year purchased.  Under the Jobs Act, beginning in 2010 and 2011, the  limit for this expensing option is increased to $500,000. (A phase out applies when capital asset purchases reach $2 million).

The Jobs Act also makes certain real-estate-related expenses eligible for the Section 179 deduction. For tax years beginning in 2010 and 2011, the $500,000 expensing limit may consist of up to $250,000 of the cost of qualifying real property. Qualifying real property is generally defined as consisting of qualifying leasehold improvement property, qualified restaurant property, and qualified retail improvement property.

“Bonus” First-year Depreciation Extended

Pre-Jobs Act law allowed business taxpayers to significantly increase their first-year depreciation deduction by providing an additional first-year depreciation “bonus” equal to 50% of the adjusted basis (generally, the cost) of qualifying property acquired and placed in service in the relevant tax year. The Jobs Act extends this benefit for 2010.

Increased Start-up Expense Deduction

The Jobs Act increases the amount that taxpayers may immediately deduct for trade or business start-up expenditures incurred in 2010 to $10,000 (from $5,000). The new $10,000 limit is reduced dollar-for-dollar once total start-up costs exceed $60,000 (increased from $50,000). Covered start-up expenditures include costs such as conducting market surveys, traveling to locate customers or supplies, advertising and training employees.

Deductibility of Health Insurance for Purposes of Self-employment Tax

The Jobs Act allows taxpayers to deduct the cost of health insurance incurred in 2010 for themselves, spouses, dependents, and children up to age 26 in calculating their 2010 net earnings from self-employment for purposes of  Social Security and Medicare taxes.

For More Information

The Jobs Act contains many more provisions that may affect you and your business. If we can be of assistance in determining how the new law’s provisions might apply to your circumstances, please do not hesitate to contact our offices at 561-624-2118.

Glenn Schanel, CPA, CFP® is the President of Schanel & Associates, PA, Certified Public Accountants, Jupiter, FL.  The firm provides tax, accounting, and consulting services to clients throughout Palm Beach County, South Florida and the United States.

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