Increase of Section 179 Expensing and Expansion to Certain Real Property
Increase the amount of §179 expense to a maximum of $500,000 subject to phase-out at $2,000,000 of assets placed in service. Within those thresholds, the Act allows taxpayers to expense up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property,and qualified retail improvement property. Effective date: For taxable years beginning in 2010 and 2011.
Extension of Bonus Depreciation
Extends the additional, first-year 50 percent depreciation for qualifying property purchased and placed in service in 2010. Effective date: For qualifying property purchased and placed in service in 2010.
Special Rule for Long-Term Contract Accounting
Bonus depreciation is decoupled from allocation of contract costs under the percentage of completion accounting method rules for assets with a depreciable life of seven years or less. This provision allows such contractors to claim bonus depreciation without triggering an increase in the completion percentage. Effective date:a For qualifying property purchased and placed in service in 2010.
Increase Vehicle Depreciation Limit
Increased first-year depreciation limits on vehicles by $8,000. New limits are $11,060 for autos and $11,160 for light trucks and vans.Effective date: For vehicles purchased and placed in service in 2010.
Extends Time To Claim §179 Election for Computer Software
Increases time to in which computer software is eligible for §179 election by one year to include any tax year beginning after 2002 and ending before 2012.
Extends Time To Revoke §179 Election
Increases time to revoke §179 Election without IRS consent by one year to include any tax year beginning after 2002 and ending before 2012.
100% Exclusion of Small Business Capital Gains
Temporarily increased the amount of the exclusion to 100 percent of the gain from the sale of qualifying small business stock that is acquired after the date of enactment in 2010 and held for more than five years.
Additionally, the Act eliminates the AMT preference item attributable for that sale. Qualifying small business stock is from a C corporation whose gross assets do not exceed $50 million (including the proceeds received from the issuance of the stock) and who meets a specific active business requirement.
The amount of gain eligible for the exclusion is limited to the greater of ten times the taxpayer’s basis in the stock or $10 million of gain from stock in that corporation.
Effective date: Stock acquired after September 27, 2010 and before January 1, 2011, and held for more than five years.
General Business Credit Carried Back Five Years
Extends the one year carryback for general business credits to five years for certain small businesses. This applies to general business credits for those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.
Effective date: Tax years beginning in 2010.
General Business Credit Not Subject to AMT
Allows certain small businesses to use all types of general business credits against their AMT. This applies to general business credits for those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.
Effective date: Tax years beginning in 2010.
S Corp Holding Period – Built In Gains Tax
Temporarily shortens the holding period of assets subject to the built-in gains tax to five years if the fifth taxable year in the holding period precedes the taxable year beginning in 2011.
Effective date: Tax years beginning in 2011.
Increased Deduction for Start-up Expenditures
Temporarily increase the amount of start-up expenditures that may be deducted to $10,000 subject to a $60,000 phase-out threshold.
Effective date: Tax years beginning in 2010.
Deductibility of Health Insurance for the Purposes of Calculating Self-Employment Tax
Allow business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in the calculation of their 2010 self-employment tax.
Effective date: Tax years beginning in 2010 only.
Remove Cellular Phones from Listed Property
Cell phones are no longer considered listed property allowing their cost to be deducted or depreciated like other business property, without onerous recordkeeping requirements.
Effective date: Tax years beginning in 2010 and later years.
Allow Participants in Governmental 457 Plans to Treat Elective Deferrals as Roth Contributions
Retirement savings plans sponsored by state and local governments (governmental 457(b) plans) can include Roth accounts, which are currently available only in 401(k) and 403(b) plans.
Effective date: January 1, 2011
Allow Rollovers from Elective Deferral Plans to Roth Designated Accounts
Participants in 401(k), 403(b), and governmental 457(b) plans are permitted to roll their pre-tax account balances into a Roth account. The amount of the rollover would be includible in taxable income except to the extent it is the return of after-tax contributions. If the rollover is made in 2010, the participant can elect to pay the tax in 2011 and 2012.
Effective date: September 27, 2010 (Requires plan document change.)
Permit Partial Annuitization of a Nonqualified Annuity Contract
Holders of nonqualified annuities (i.e., annuity contracts held outside of a tax-qualified retirement plan or IRA) can elect to receive a portion of the contract in the form of a stream of annuity contracts, leaving the remainder of the contract to accumulate income on a tax-deferred basis.
Effective date: January 1, 2011.
