After the last couple years of bailouts for financial firms and large manufacturing companies, small business is finally getting some much needed direct relief. President Obama signed into law this week the Small Business Jobs & Credit Act of 2010, which aims to loosen up credit for small businesses and provide immediate tax breaks to help these companies. But many of the law's provisions are short-term measures that businesses need to understand now if they are to enjoy the benefits. Here are five provisions that may be immediately useful for your business:
- Money to Lenders: The law authorizes $30 billion of funds to be directed to small businesses through community banks and additional funds to state lending institutions. This is intended to get more capital flowing and allow small businesses to borrow needed capital at reduced rates. Check with your local bank to find out more.
- Start Up Expense Deduction: For startup expenses of new companies, the maximum allowable business tax deduction of $5,000 is doubled to $10,000. But this increase is only applicable in tax year 2010.
- Qualified Small Business Stock Deduction: If your small business has investors looking for liquidity, now is a good time to act. A holder of qualified small business stock can exclude 100% of the gain on the sale of stock through the end of 2010. This was increased from the 75% exclusion that was enacted as part of the stimulus in 2009 (the normal exclusion prior to 2009 was 50%). This provisions is also only available to Subchapter C corporations (S corporations and LLCs do not qualify).
- Capital Expenditure Limits. Businesses that acquire capital equipment any time through 2011 can write off up to $500,000, which is double the $250,000 available under the 2009 stimulus.
- Health Premium Deduction. Anyone who is self-employed can deduct as a business expense the amount of health care premiums paid in 2010 from the amount of income that is subject to self-employment tax. Again, this provision is limited to one year.
These are just a few of the provisions intended to help small businesses. If you own a small business, which do you think will be most beneficial to you?