More Depreciation Deductions (buying fixed assets for your business)
 

  • Section 179 Expense is raised to $500,000
    • Section 179 is the immediate write-off of an asset’s purchase price in the year the asset is bought
    • Caveat: If you bought more than $2,000,000 of fixed assets during the year, your deduction is limited
    • For tax years beginning in 2010 and 2011
       
  • Section 179 Expense of $250,000 is now available for certain lessors of houses and buildings. This is great news for lessors!
    • Available for the following:
      • Qualified Leasehold Improvement Property
      • Qualified Restaurant Property
      • Qualified Retail Improvement Property
    • For property placed in service after December 31, 2009
    • For any tax year beginning in 2010 or 2011
       
  • 50% Bonus Depreciation EXTENDED to 2010
    • For property placed in service in 2010 (in 2011 for certain long production property)
    • This does not have the $2,000,000 limitation that Section 179 has

 

Business Breaks

  • Start-up expense deduction is doubled (start-up costs are the costs prior to when your business begins)
    • Deduction amount increased to $10,000 (from $5,000)
    • Phase-out threshold increased to $60,000 (from $50,000)
    • For tax years beginning in 2010
  • Shorter holding period for S Corps who converted from C Corps (Now it’s just five years!)
    • Instead of havine to wait seven or ten years to sell your assets with built-in gains, now you only have to wait five years. Then you can sell them without the built-in gaintax.
    • Holding Periods
      • For tax years beginning in 2008 and before, the holding period was ten years.
      • For tax years beginning in 2009 and 2010, the holding period is seven years
        (if 7th tax year in recognition period precedes the tax year beginning in 2009 or 2010.)
      • For tax years beginning in 2011 and forward, the holding period is five years
        (if 5th tax year in recognition period precedes the tax year beginning in 2011.)
    • Same rules apply to S Corps that received property from a C Corp in a non-taxable
      carryover basis transfer
  • 100% exclusion for capital gains on certain small business stock
    • For non-corporate taxpayers who acquire Section 1202 stock at the original issuance date and hold it at least five years; the stock must be from a C Corp with gross assets less than $50 million at issuing date.
    • Amount of gain that can be excluded from tax is limited to the greater of $10 million or 10 times the stock’s basis.
    • Old exclusions: 50% on stock bought after enactment of this bill.
    • This exclusion will not trigger the alternative minimum tax (AMT).

 

Enhanced Business Credit

  • The general business credit carry-back period increases to five years
    (under current law it is one year)

    • For “eligible small businesses” -defined as:
      • “proprietorships, partnerships, and non-publicly traded corporations with less
        than $50 million in average annual gross receipts for the prior three years”
    • For tax years beginning in 2010

 

The Downside

  • Lessors of rental properties will have to start issuing 1099s
    • They will have to file 1099s for rental property expenses greater than $600
      • Exceptions for:
        • Individuals renting out their personal residences
        • Taxpayers whose rental income is less than an IRS-determined minimal amount
      • For payments made after December 31, 2010
  • Penalties will be increased if you don’t issue 1099s!
    • Penalties for failure to file information returns increased (includes 1099s)
      • Maximum penalty increases to $250,000/year (from $75,000/year)
      • For returns filed after December 31, 2010

 

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