Changes in Small Business Tax Law for 2010 and Beyond

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“the Act”), was signed into law December 17, 2010. The Act generally consists of extensions of expired or expiring tax provisions. One of the most important features is the extension of the Bush-era tax cuts set to expire December 31, 2010.

The Act included changes to personal and business taxes. The most important business provisions of the Act are described below. You can find information on changes to personal taxes here.

Business Changes to Tax Laws

Effective for calendar year 2010 and 2011:

1. Several business incentives that expired December 31, 2009 were extended for two years through 2011. These include:

  • The research and development credit
  • Indian employment tax credit
  • The Work Opportunity Tax Credit
  • Employer wage credit for employees who are in the military on active duty

Effective September 9, 2010 through December 31, 2012:
2. The Act allows 100 percent expensing of qualifying property placed in service September 9, 2010 through December 31, 2011. Note: for 2012 only, 50 percent bonus depreciation is allowed.

Effective for calendar year 2011 only:
3. The Act establishes a “payroll tax holiday” – a reduction in the employee-only portion of social security tax.

Effective for calendar year 2012:
4. The section 179 limitation for qualified property is $125,000 with a phase-out threshold of $500,000. This is a decrease from the 2010 and 2011 limitation of $500,000. However, absent the Act, the limit and threshold would have been significantly lower ($25,000 and $200,000, respectively).

These provisions expired at the beginning of 2010:

  • Increased Standard Deduction for Real Property Tax
  • New Vehicle Sales Tax Deduction
  • First $2,400 Unemployment Compensation Exclusion
  • Required Minimum Distribution Waiver

These provisions are set to expire at the beginning of 2011:

  • Making Work Pay Credit
  • Alternative Motor Vehicle Credit

You can find more information on Individual Tax Changes brought about by the Act here on the REAP website.

As with any tax planning, you should consult your tax professional to determine if any of these provisions will affect you in the coming years and what you can do to prepare for them.

Source: Thanks to Kandi Brown, Franchisee, H&R Block - Seward/David City, for contributing this article. You can reach Kandi at 402.643.4488 or