My last post included information about new tax laws that impact your 2009 business tax return, but the 2010 tax year also brings
with it several changes to business tax law.
Tax laws often define and support your small business
investment and growth strategies. So,
it’s important to take stock now, and assess how your business can comply with,
and benefit from the changes that apply to the 2010 tax year.
Below is a summary of the major changes in federal income
tax law that can impact your business in 2010. While some of these laws are
already legislated and in the public domain; more may follow, driven by
political and economic factors. This is not a comprehensive list, so be sure to
talk to your tax advisor if you have questions about how your small business is
affected. You can also refer to several informative online resources including the
2010 Small Business Tax Center
on Business.gov or the IRS’s
Small Business and Self-Employed Tax Center.
To help you plan and manage your tax obligations throughout
the year, the IRS has also provides an online Tax
Calendar for Small Businesses and the Self-Employed (the print calendar is
now sold out).
2010 Tax Law Changes
that Impact Small Business
Major changes include:
of Business Debt – This change was first implemented under the American
Recovery and Reinvestment Act (ARRA) in 2009 and enables certain businesses to elect to delay recognition of income from
the cancellation of business debt in both 2009 and 2010. Income recognition can
be deferred until the 5th year after the reacquisition, and then the income is
included ratably over the following five years. If you wish to elect this
option refer to the guidelines from the IRS here.
Production Activities Deduction – In 2010 this deduction increases to nine
percent of qualifying business net income. “Domestic production” applies to a
restricted group of businesses including construction, engineering or
architectural firms. The IRS has more information on this deduction and
Mileage Rates – Standard mileage rates for the business use of vehicles has
been reduced slightly for 2010.
Beginning on Jan. 1, 2010, the standard mileage rate for the use of a
car (also vans, pickups or panel trucks) is:
- 50 cents per mile for business miles
- 16 cents per mile driven for medical or
- 14 cents per mile driven in service of
charitable organizations (no change)
Buyers with Home-Based Businesses –
If you purchase a first-time home and choose to operate your business from that
home you can still qualify for an $8,000 tax credit – if you purchase your home
before April 30, 2010. The IRS has more information about eligibility here.
Tax Credit – This tax credit for research and development was set to expire
after 2009, but the House of Representatives has since voted
for its extension, effectively pushing $31.1 billion in expiring tax
provisions through 2010. Keep an eye on
this one here
as it pushes on to the Senate.
179 Expense Deduction due to be Phased Out – The increases in the Section 179
Expense Deduction, first introduced by President Bush in 2008, phases out
completely in 2010. Small business had been able to deduct up to $250,000 of
the cost of machinery, equipment, vehicles, furniture and other qualifying
property placed in service during 2009. In 2010, this limit is due to drop to
Tax Changes – The maximum amount of wages subject to Social
Security tax will remain the same as 2009 at $106,800. As in prior years,
there is no limit to wages subject to the Medicare Tax; therefore, all covered
wages are still subject to the 1.45% tax. The FICA tax rate, which is the
combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%,
remains at 7.65% for 2010. The maximum social security tax that employees and
employers will each pay in 2010 is $6,621.60.
are just some of the changes for tax year 2010 – visit the IRS’s Tax Changes
for Business site for updates now and throughout the year.