On September 16, 2010, the U.S. Senate approved the Small Business Jobs Bill of 2010 (HR 5297), which provides $12 billion in tax breaks targeting small business. The tax breaks include the extension of bonus depreciation and enhanced Code Section 179 expensing.
The Senate bill extends, through December 31, 2010, 50% first-year bonus depreciation that had expired at the end of 2009. The extension is retroactive to January 1, 2010.
The bonus depreciation provision is the most expensive tax break in the Senate bill, with a cost of $5.4 billion over 10 years, but carrying an initial cost of $38 billion in its first two years.
Code Section 179 Expensing
Eligible taxpayers may elect to claim a Code Section 179 expense deduction on the purchase price of qualified Code Section 179 property.
Under the current law, the maximum deduction for tax years beginning in 2010 is $250,000. The dollar limit is reduced by the amount of qualifying property placed in service during the tax year exceeding $800,000. For 2011, the expensing limit is scheduled to revert to prior levels of $25,000 and $200,000, respectively.
The Senate bill increases the maximum deduction to $500,000 and the investment limit to $2 million for tax years beginning in 2010 and 2011.
Expectations Relative to House and President Obama Approval
The House, which is not expected to alter the bill, is scheduled to vote on the bill during the week beginning September 20, 2010.
President Obama has indicated that he will sign the bill as soon as it arrives on his desk.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.