The government knows that small businesses are the cornerstone of American commerce.  Thus, Congress has passed a number of small business tax incentives in the recent months to help these businesses stay strong in these extraordinary times.

There are a number of new depreciation rules for 2009.  You can immediately deduct up to $250,000 of equipment as well as property within or attached to buildings such as printing presses.  This deduction can be used to increase first year depreciation on qualifying property bought for a business.  Bonus Depreciation has also been extended.  It applies to property with a depreciable life of 20 years or less, computer software, and leasehold improvements.  Bonus depreciation can be combined with the immediate deduction provisions and allows businesses to expense 50% of the cost for an asset the year it is placed into service.  Also, the depreciation limit for passenger cars and light trucks has been increased to $10,960.  This new limit only applies to new vehicle purchases in 2009.

The net operating loss carryback period has been extended to five years and applies to losses that occurred during the 2008 tax year.  Taxpayers can choose to carry the operating loss back three, four or five years.  To apply for a quick refund, C-Corporations can file a Form 1139 and individual owners can file a Form 1045.

The Work Opportunity Tax Credit can provide employers a credit of 40% of first year wages up to $6,000 or $2,400 for hiring disadvantaged workers.  Disadvantaged workers eligible include but are not limited to veterans, ex-felons, qualifying summer youth employees and qualifying SSI recipients.

The 2009 Stimulus Act allows taxpayers to defer recognizing income from the discharge of debt.  This applies for the 2009 and 2010 tax years and will defer income until 2014.  At that time, the income will be included over the next five tax years.

Estimated tax requirements for some small businesses have dropped by 10%.  Instead of paying 100% of 2008 Taxes, you must only pay 90%.  There are restrictions as to who qualifies for these decreased estimates.  Business owners who file as married filing joint must have an AGI that is less than $500,000.  Single owners must have income that does not exceed $250,000.  Also, in either case, greater than one-half of the owner’s gross income must come from the small business.

If you have any questions or would like more information, please contact:

Diane Burke, CPA

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