SMALL BUSINESS JOB ACT IN 2010
EXPANDED SECTION 179 DEDUCTION
For tax year 2010 and 2011, the section 179 expense
deduction amount increases to $500,000 of capital
equipment purchases and adjusts the asset addition
phase-out threshold to $2 millions. As a result, a greater
number of businesses will qualify for the Section 179
write-off.
For those owning restaurants, retail stores, or other
commercial building under lease can benefit if the
improvements are completed in 2010 or 2011 tax year.
Prior to this legislation, the first-year Section 179 expense
deduction allowed business to write off the first $250,000
and this deduction phased out as the taxpayer’s eligible
purchases exceeded $800,000.
PARTIAL ANNUITIZATION LIFE INSURANCE
AND ANNUITY CONTRACTS
Effective for amounts received in tax years after
2010, a taxpayer is permitted to annuitize part of
investment in an annuity, endowment, or life
insurance contract while not annuitizing the balance.
However, the portion of annuitized must be paid over
10 years or more or be annuitized for the lives of one
or more individuals.
Partial distributions from the cash value of an annuity
or life insurance are taxable first as ordinary income.
The holder is permitted to annuitize the entire
contract, recovering each lifetime payment partially
as ordinary income and partially as return of basis.
2010 BREAK ON SELF EMPLOYMENT TAX
Effective only for the tax year beginning in 2010, a
self-employed proprietors and partners may
deduct the cost of health insurance, including that
of spouse and dependents/children not yet age 27
as of the end of tax year, both for income taxes
and self-employed Social Security tax which the
cost of health insurance cannot be used to
calculate before.
The value of this one-year deduction in computing
self-employment tax will be significantly greater for
those whose employment income is under
$106,800, so that the taxpayer can receive the full
15.3% benefit of deduction.
1099 REPORTING BY LANDLORDS & INCREASE IN INFORMATION RETURN PENALTIES
Taxpayers conducting a business with payment of $600 or more to a service provider are required to issue
Form 1099 report to both IRS and payee. Under the act, those landlords making payments $600 more to
individuals or partnerships are required to issue1099 information returns.
The tax law already imposes a series of penalties on those who fail to file 1099 and other information returns
with both the IRS and payee.
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