President Barack Obama approved a $168 million American Recovery and Reinvestment Act of 2009, or the Economic Stimulus Package, this year. The stimulus package was created to help the US economy get back on track after recently being declared in a recession. As a small business owner, you may benefit from the Stimulus Package. Some of the new tax provisions will put more money into the hands of small business owners, encouraging you to expand and improve your business operations.
The Federation of American Consumers and Travelers (FACT) has published the key tax changes affecting small businesses and here are some highlights you should be aware of:
- A Section 179 Increase
- The Bonus Depreciation Provision
- S-Corp holding period
- Expanded loss carryback of net operating losses for small businesses
- Incentives to hire unemployed veterans and disconnected youth
- Extension of monetization of accumulated AMT and Research and Development credits in lieu of bonus depreciation
- Delayed recognition of certain cancellation of debt income
- Qualified small business stock
The limit for first year expense has increased from $128,000 to $250,000. Business owners can deduct the full amount from annual income up to $250,000 instead of depreciating newly acquired assets over a number of years.
This provides a one-year depreciation deduction for 50 percent of the value of the property placed in service during 2008 when the value exceeds $250,000. The remaining cost is depreciated under the regular depreciation rules.
Temporarily shortens the holding period of assets subject to the built-in gains tax from 10 years to 7 years.
Net operating losses may be carried back to the two years before the year that the loss arises and carried forward to each of the succeeding twenty years after the year that the loss arises. The new law extends the maximum net operating losses carryback period from two years to five years for small businesses with gross receipts of $15 million or less.
The new law expands the work opportunity tax credit to include unemployed veterans and disconnected youth. Individuals qualify as unemployed veterans if they were discharged or released from active duty from the Armed Forces during 2008, 2009 or 2010 and received unemployment compensation for more than 4 weeks during the year. Individuals qualify as disconnected youths if they are between the ages of 16 and 25 and have not been regularly employed or attended school in the past 6 months.
Allows AMT and loss taxpayers in 2009 to receive 20% of the value of their old AMT or research and development credits to the extent such taxpayers invest in assets that qualify for bonus depreciation.
Lets the businesses recognize cancellation of debt income over 10 years for specified types of business debt repurchased by the business in 2009 or 2010.
Increases the exclusion for gain from the sale of certain small business stock held for more than five years from 50% to 75% for stock issued after the enactment date and before 2011.
For more information about how the Stimulus Package can help you and your small business, please check with a tax advisor and/or visit Recovery.gov.
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