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Dear Client,
The recently enacted 2010 Small Business Jobs Act includes
many new tax breaks and incentives, as well as some new rules for small
businesses and individuals. Below is a brief overview of some of these
new tax laws.
Tax Incentives and Rule Changes: Businesses/Self
Employed
Enhanced small business
expensing (Section 179 expensing). Small business taxpayers can elect to write off the cost of
these expenses in the year of acquisition in lieu of recovering these
costs over time through depreciation. In 2010 and 2011, the limit of
these expenses increased to $500,000 and the investment ceiling increased
to $2,000,000
Extension of 50% bonus
first-year depreciation. The new law extends the first-year 50% write-off to apply
to capital expenditures for qualifying property placed in service in 2010
(2011 for certain property).
Boosted deduction for
start-up expenditures. The new law allows taxpayers to deduct up to $10,000
in trade or business start-up expenditures for 2010.
Deductibility of health
insurance in calculating self-employment tax. The new law allows business owners to deduct the full
cost of health insurance incurred in 2010 for themselves and their family
members in calculating their 2010 self-employment tax.
Cell phones removed from
listed property category. This means that the cost of cell phones can be deducted or
depreciated like other business property, without onerous recordkeeping
requirements.
Tax Incentives and Rule Change:
Individuals/Landlords
Allow rollovers from
elective deferral plans to designated Roth accounts. 401(k),
403(b), and governmental 457(b) participants are now
permitted to roll over their pre-tax account balances into a designated
Roth account. The amount of the rollover will 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 tax in
2011 and 2012.
Information reporting
required for rental property expense payments. For payments made after Dec. 31, 2010, the new
law requires persons receiving rental income from real property to file
information returns with IRS and service providers reporting payments of
$600 or more during the tax year for rental property expenses. Exceptions
may apply.
Please keep in mind that these are just some of the new
changes we feel most applicable to the majority of our clients. If
you would like more details about any aspect of the new legislation and
how it applies to your unique situation, please call us at 203.967.2231.
Sincerely,
Joseph M. Dowling,
CPA
Sean M. Dowling, CFP, EA
President, The Dowling
Group
VP, The Dowling Group
Pursuant
to the rules of professional conduct set forth in Circular 230, as
promulgated by the United States Department of the Treasury, nothing
contained in this communication was intended or written to be used by any
taxpayer for the purpose of avoiding penalties that may be imposed on the
taxpayer by the Internal Revenue Service, and it cannot be used by any
taxpayer for such purpose. No one, without our express prior written
permission, may use or refer to any tax advice in this communication in
promoting, marketing, or recommending a partnership or other entity,
investment plan or arrangement to any other party.
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