Good News From Small Business Jobs Act of 2010

This post is in: Business


There’s a lot of news about the additional SBA loans available, at least theoretically, for business. And there are also a few tax breaks.

  • Zero Capital Gains Tax

Now before you get too excited, this is only effective for capital gains that come from qualified small business investments that you have held for at least five years. If this fits for your company, and you’re thinking about selling it, zero tax is a pretty good number!

  • Increased Section 179.

If you buy equipment, furniture and other personal property, you typically have to capitalize the expense and then depreciate it over a period of years. Section 179 let’s you take an immediate deduction.

I can remember when Section 179 jumped to $25,000 and we thought it was the best thing ever. And now Section 179 is at $500,000. Wow.

  • 50% Bonus Depreciation.

We’ve had an extension of the bonus depreciation. For new capital expenditures that you make in your business, you can take a 50% bonus depreciation in the first year. Note that this is simply a front-end-loading of the depreciation. It doesn’t give you more depreciation, just changes the timing.

  • New Health Insurance Tax Break.

I’ve gotten a couple of questions about that. What’s different? The change is that for Schedule C taxpayers, your medical insurance will become a deduction on the Schedule C itself. That means it’s a deduction before you calculate self-employment tax.

I think it’s interesting that the biggest medical insurance debacle is the non-deductibility of S Corporation insurance for shareholders who own more than 2% of the company. I wish they would have addressed that issue!

  • Cell Phone is De-Listed.

In the category of fixing a problem most small business owners didn’t even know they had…the winner is De-listing Cell Phones!

Here’s the issue. Cell phones, along with autos and computers are considered listed property. Or rather, they used to all be considered that. Now that cell phones are no longer listed, you don’t have to keep logs to separate business and personal calls and pro-rate the costs. And we all knew you did before…right?

Now you just need to keep logs for computer use and car use. And we all know you do now….right?

  • Increase in Start-up Expenses.

There are certain costs that you end up incurring before you really get going with your business. These are called start-up expenses. Generally, you need to capitalize and then amortize the expenses over 180 months. You can now immediately expense up to $10,000 of those start-up costs.

  • Five year carry-back of business credits.

For the past two years we’ve been able to take a five year carry-back of net operating losses. For the people who’ve had business losses over the past few years, this has been a great benefit. Now you get to take business tax credits back.

  • Change in penalty calculation.

Tax penalties for errors in reporting have moved from fixed dollar penalties to percentage. This means much smaller penalties for small businesses. I think that one is fair too.


  1. J dancer says:

    Re the Zero Cap gains tax….is a rental property held for more than 5 years count as a Qualified Small Business Investment?–where can I find the definition of a Qualified Small Business Investment, e.g. dos an LLC membership count that invests in Real Estate? does stock of an S corp count? thanks

  2. Diane Kennedy says:

    This is only for C Corporation stock where the entity (C Corp) qualifies as a small business.

    “Qualified Small Business”
    QSBS may generally only be issued by a “qualified small business,” within the meaning of Code Section 1202, which generally requires that the issuer:
    Be a domestic (US) C corporation;

    * Have aggregate gross assets which, at all times on or after August 10, 1993, through and immediately following the issuance of the QSBS, do not exceed $50 million; and
    * Agree to submit such reports to the IRS and shareholders as the IRS may require to carry out the purposes of Section 1202.

    Take a look at Sec 1202 for more requirements.

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