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Depreciation Bonus Extended

Wed September 29, 2010 - National Edition
CEG



On Sept. 27, President Barack Obama signed the Small Business Lending Fund Act (H.R. 5297) into law, creating a $30 billion fund to help small businesses expand and hire. The bill also includes eight separate tax breaks for small businesses and a boost for Small Business Administration loan programs.

The legislation reinstates the 50 percent depreciation bonus for 2010 and also creates a lending fund to provide capital for small businesses and increases Sec. 179 expensing levels to $500,000 (and the phase-out threshold amount to $2 million) for 2010 and 2011.

Obama said the incentives will help small businesses create jobs in the short term.

The credit provisions of the bill include an extension of the fee waiver for SBA 504 loans, a Small Business Administration financing program, first enacted as part of the American Recovery and Reinvestment Recovery Act and a permanent increase of the maximum loan amounts to a range of $5 to $5.5 million.

Larger projects are now eligible for 504 loans and borrowers who already have loans with the SBA can now return for additional funding. Also included is a new temporary program that helps small businesses refinance existed debt.

Increase of Section 179

To motivate companies to spend money on equipment, Section 179 of the tax code allows businesses to write off capital expenditures immediately. Due to the Recovery Act, businesses could write off up to $250,000 worth of equipment through 2009. This bill extends the benefit through 2011 and the maximum increases to $500,000.

Bonus depreciation Extension

Businesses also can opt to recover the cost of capital expenditures by writing off a portion of the cost of the purchase over a number of years, following a depreciation schedule.

Businesses can temporarily front-load that deduction by writing off 50 percent of capital expenditures made in 2008 and 2009. This bill extends that first-year depreciation for qualifying property that is put in service in 2010.

Help for start-ups

Currently, entrepreneurs can deduct up to $5,000 in start-up expenses. That amount is reduced by the amount that the start-up’s expenses exceed $50,000. The bill would increase the deduction to $10,000 for 2010, and the deduction would be reduced by the amount that an entrepreneur exceeds $60,000.

The new fund would be available to community banks to encourage lending to small businesses.