2010 Tax Form 1040: Small Business

The 2010 Form 1040 reflects a number of new tax breaks for small businesses.  Today’s post addresses changes to the tax laws regarding small business expensing, depreciation, and general business credits.

To help small businesses quickly recover the cost of capital outlays, small business taxpayers can elect to write off Section 179 expenditures in the year they are made instead of recovering them through depreciation. For 2010, you generally may expense up to $500,000 of qualifying property placed in service during the tax year. This annual limit is reduced by the amount by which the cost of property placed in service exceeds $2,000,000.

Businesses that acquire and place qualified property into service after September 8, 2010 can now claim a depreciation allowance in the placed-in-service year equal to 100% of the cost of the property. Businesses that acquired qualified property from January 1, 2010 through September 8, 2010 can claim a bonus first-year depreciation allowance of 50% of the cost of the property.

Finally, there are changes in the carryback of general business credits. Generally, a business’s unused general business credits can be carried back to offset taxes paid in the previous year, and the remaining amount can be carried forward for 20 years to offset future tax liabilities. However, for 2010, eligible small businesses can carry back unused general business credits for five years instead of just one.

If you have any questions about these changes, or about tax planning, please contact our office.

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