Tax Benefits for Small Business

 

Recovery Act Tax Benefits for Small Businesses & Individuals

TAX CUTS AND BENEFITS GUIDEBOOK FOR INDIVIDUALS

Although the majority of the American Recovery and Reinvestment Act is grants to state governments, local governments, and nonprofits, over a third is made up of tax cuts and benefits for individuals and households.  This document provides an overview of some of these key tax cuts and benefits.   
Click here to view the Tax Cuts & Benefits Guidebook

 

RECOVERY ACT SMALL BUSINESS FUNDING & TAX MEMO

If you are a small business employee or owner please click on the link to view the 7th Congressional District tax memo. This memo includes important tax information and funding opportunities available through the American Recovery and Reinvestment Act.
Click here to view the 7th Congressional District tax memo

 


 

Business Tax Benefits under the Recovery Act

 

Congress has worked to enact an array of tax cuts which are a crucial piece of our efforts to turn the economy around.  These tax cuts are broad based and touch on many aspects of American life – from tax breaks for working and middle-class families and small business owners, to families wanting to buy a home or investing to make an existing one energy efficient, to sending children to college or to buying a car.  These tax cuts are helping families and businesses across the country and injecting consumer demand into the economy and spur business investment and job creation. All totaled, Congress has enacted more than $800 billion in tax cuts. You’ll find the descriptions of these tax incentives below:

 Business Tax Incentives to Create Jobs ($10 billion over 10 years):

  • Bonus Depreciation: Helps businesses quickly recover costs of new capital investments by extending the increased bonus depreciation for businesses making investments in new plants and equipment in 2009.
  • Small Business Expensing: Spurs small business investment by extending small business expensing, doubling the amount small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2009 ($125,000 to $250,000). This write-off phases out completely for investments over $800,000 (up from $500,000).
  • Buying Back Debt: Provides assistance to companies looking to reduce their debt burdens by delaying the tax on businesses that have discharged indebtedness, which will help these companies strengthen their balance sheets so they can invest in job creation.
  • Small Business Loss Carrybacks: Increases cash flow for small businesses by providing a 5-year carryback of net operating losses (NOLs). This would allow many small businesses to write off losses incurred in 2008 against taxes assessed over the previous 5 years (current law limits NOL carryback to the previous 2 years), thereby reducing their taxes this spring.
  • Small Business Investment: Spurs investments in small businesses by cutting the capital gains tax on investors in small businesses who buy stock (in the next two years) and hold it for more than 5 years.
  • Jobs for Recently Discharged Unemployed Veterans and Disconnected Youth: Creates jobs with business tax credits for hiring recently discharged unemployed veterans who have been out of work or youth who have been out of school for 6 months prior to hire

  •  Renewable Energy and Energy Efficiency Tax Incentives to Spur Energy Savings and Create Jobs ($20 billion over 10 years):

    • Energy Efficient Home Tax Credits: Promotes energy efficient investments in homes by extending and expanding tax credits through 2010 for investments such as new furnaces, energy-efficient windows and doors, and insulation. Increases the credit from 10 percent to 30 percent of the cost of the investment and raises the credit cap from $500 to $1,500, saving American families money on their energy bills.
    • Plug-in Hybrid Tax Credit: Spurs the next generation of cars by providing a tax credit of up to $7,500 for families who purchase plug-in hybrid and all-electric vehicles.
      • Tax Credit for Renewable Energy: Extends for three years the production tax credit (PTC) for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, and waste-to-energy facilities (through 2013).
    • Easing Credit Crunch for Renewable Energy: Provides grants of up to 30% of the cost of building a new renewable energy facility in 2009 and 2010 in lieu of current law tax credits, or permits facilities to claim a 30% investment tax credit instead of a production tax credit, to address the current credit crunch for investments in renewable energy.
    • Tax Incentives for State and Local Job Creation ($26 billion over 10 years) for critical activities like school construction, low-income housing, and infrastructure development – particularly in area hardest hit by the recession.

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     Business Tax Benefits under the Hiring Incentives to Restore Employment (HIRE) Act

    • Tax incentives for businesses to spur immediate job growth. A new payroll tax exemption would create a common-sense, targeted, and effective way to encourage employers to begin hiring unemployed workers today and is estimated to spur about 300,000 new jobs.
    • Payroll Tax Exemption. Provides businesses with an exemption from Social Security payroll taxes for every worker hired in 2010 who has been unemployed for at least 60 days. (The maximum value of this incentive is $6,621, which equals to 6.2 percent of wages paid in 2010 up to the FICA wage cap of $106,800.) The longer that a business has a new qualified worker on its payroll, the greater the tax benefit. The House amendments incorporate an IRS fix to make sure that small businesses can take advantage of the payroll tax holiday.
    • Bonus for Keeping Employees Long Term.  Provides an additional $1,000 income tax credit for every new employee retained for 52 weeks.  Estimated cost of these provisions: $13 billion over 10 years