More tax law: selected provisions of 2010 Small Business Jobs Act.

• Author: Josephs, Stuart R.
• Position: FedTax

The following are highlights of the 2010 Small Business Jobs Act (P.L. 111-240) enacted Sept. 27,2010.

Bonus Depreciation

Old Law: An additional first-year depreciation deduction was allowed equal to 50 percent of (he adjusted basis of qualified property placed in service during 2008 and 2009 (2009 and 2010 for certain longer-lived and transportation property).

New Law: For property placed in service in tax years ending after 2009, this deduction is extended for one year to apply to qualified property acquired and placed in service during 2010 (or placed in service during 2011 for certain long-lived and transportation property).

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Expensing of Depreciable Assets

The new law increases the maximum amount a taxpayer may elect to expense under IRC Sec. 1 79 to $500,000, and increases the phase-out threshold amount to $2 million for tax years beginning in 2010 and 2011. The $500,000 amount is reduced (but not below zero! by the amount by which the cost of qualifying property placed in service during the lax year exceeds $2 million.

The new law also temporarily expands the definition of property qualifying for Sec. 179 treatment to include:

* Qualified leasehold improvement property [Sec. 168(c)(6)];

* Qualified restaurant property [Sec. 168(c) (7)]; and

* Qualified retail improvement properly [Sec. 168(e)(8), ignoring Sec. 168(e)(8)(E)].

The maximum amount that may be expensed for this real property is $250,000.

Cell Phones

Old Law: Cell phones were listed properly Stricter substantiation requirements and more restricted depreciation rules apply to listed property

New Law: For tax years ending after 2009, cell phones are excluded from the definition of listed property

Temporary Deduction for Health Insurance Costs in Computing Self-employment Income

For only a taxpayer's first tax year beginning after 2009, the income tax deduction allowed to self-employed individuals for the cost of health insurance for themselves, their spouses, dependents and children, who have not attained age 27 at the end of the tax year, also is allowed in calculating net earnings from self-employment for self-employment tax purposes.

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Temporary Reduction in Recognition Period for S Corp Built-in Gains

For only tax years beginning in 2011, the new law provides that, for purposes of computing the built-in gains tax under Sec. 1374, the "'recognition period" is the five-year period beginning with the first day of the first tax year...