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Business Depreciation and Depletion Changes
- First-year Bonus Depreciation Allowed for Assets Placed in Service through 2012. The Act generally allows 100% first-year bonus depreciation for qualifying new (not used) assets that are acquired and placed in service between 9/9/10 and 12/31/11. It also allows 50% first-year bonus depreciation for qualifying new (not used) assets that are placed in service in calendar year 2012. For a new passenger auto or light truck that's used for business and is subject to the luxury auto depreciation limitation, the 100% and 50% bonus depreciation breaks increase the maximum first-year depreciation deduction by $8,000 for vehicles acquired and placed in service by 12/31/12.
- 15-year Depreciation for Leasehold Improvements, Restaurant Property, and Retail Space Improvements Extended through 2011. The 15-year straight-line depreciation privilege for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail space improvements is retroactively restored for property placed in service in 2010 and extended to cover property placed in service in 2011. (Without the favorable 15-year depreciation rule, leasehold improvements, restaurant building improvements, restaurant buildings, and retail space improvements generally would have to depreciated straight-line over 39 years.)
- Suspension of Percentage Depletion Net Income Limitation for Marginal Properties Extended through 2011. The suspension of the 100%-of-net-income limitation on percentage depletion deductions for marginal oil and gas properties is retroactively reinstated for tax years beginning in 2010 and extended through tax years beginning in 2011.
Business Tax Credit Changes
- Research Credit Extended through 2011. The Act retroactively restores the research credit for 2010 and extends it through 2011 to cover qualifying expenses paid or incurred in those years.
- Work Opportunity Credit Hiring Deadline Extended by Four Months. The Act extends the general deadline for employing eligible individuals for purposes of claiming the Work Opportunity Tax Credit by four months, from 8/31/11 to 12/31/11.
- Differential Pay Credit for Small Employers Extended through 2011. Legislation enacted in 2008 created a tax credit for eligible small employers that provide differential pay to employees while they serve in the military. The credit equals 20% of differential pay of up to $20,000 paid to each qualifying employee during the tax year. The credit expired at the end of 2009. The Act retroactively restores it to cover payments made in 2010 and extends it to cover payments made in 2011.
- Contractor Credit for Building Energy-efficient Homes Extended through 2011. The Act retroactively reinstates the $2,000 per-home contractor tax credit for building new energy-efficient homes in the U.S. (including manufactured homes) for 2010 and extends it through 2011. The credit can also be claimed for substantially reconstructing and rehabilitating an existing home and making it more energy-efficient. Homes that don't fully meet the energy-efficiency standards may qualify for a reduced $1,000 credit. To qualify for this credit, a home must be sold by 12/31/11 for use as a residence.
Business Charitable Contribution Changes
- Enhanced Deduction for Food Donations Extended through 2011. The new law retroactively restores for 2010 and extends through 2011 the enhanced charitable contribution deduction for non-C corporation businesses that donate food (it must be apparently wholesome when donated). This provision is intended for non-C corporation businesses that have food inventories, such as restaurants.
- Enhanced C Corporation Deduction for Book Donations Extended through 2011. The Act retroactively restores for 2010 and extends through 2011 the enhanced deduction for C corporations that donate books to schools. This provision is intended for C corporations that have book inventories, such as publishers and retailers.
- Enhanced C Corporation Deduction for Computer Donations Extended through 2011. The new law retroactively restores for tax years beginning in 2010 and extends through tax years beginning in 2011 the enhanced deduction for C corporations that donate computer equipment and technology to qualifying educational organizations and libraries.
- Favorable Rule for S Corporation Donations of Appreciated Assets Extended through 2011. The new law retroactively restores for tax years beginning in 2010 and extends through tax years beginning in 2011 the favorable shareholder basis rule for stock in S corporations that make charitable donations of appreciated assets.