Do you qualify for these tax breaks?
Find out what the 2010 Tax Relief Act means for you and your veterinary practice.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) was signed into law Dec. 17, 2010. This act extends the Bush-era tax cuts for two years, provides significant estate tax relief and includes a two-year alternative minimum tax (AMT) patch. The act also contains new tax breaks for both individuals and businesses, including 100 percent first-year write-offs of qualifying property and a payroll/self-employment tax cut of 2 percent for 2011 for employees and self-employed individuals.
A helping hand: The 2010 Tax Relief Act rewards your past investments with extended provisions andencourages future business ventures with bonus incentives. (TIM TEEBKEN/GETTY IMAGES)
Incentives for investing in machinery and equipment
The following incentives were included in the 2010 Tax Relief Act:
> Bonus depreciation of 50 percent to 100 percent for investments made after Sept. 8, 2010, and before Jan. 1, 2012. A 50 percent bonus first-year depreciation allowance is included for property placed in service after Dec. 31, 2011, and before Jan. 1, 2013.
> Extension through Dec. 31, 2012, of the election to accelerate the AMT credit instead of claiming additional first-year depreciation.
> A first-year expensing deduction designed to encourage business spending (Section 179). The Small Business Jobs Act of 2010 (Jobs Act) temporarily increased the dollar and investment limits to $500,000 and $2 million for 2010 and 2011. The 2010 Tax Relief Act provides for a $125,000 limit and a $500,000 investment limit for 2012. Off-the-shelf computer software will also qualify for the deduction if placed into service in a tax year beginning before 2013.
Reinstated tax breaks and extended provisions
The Code Section 41 research tax credit expired at the end of 2009. The 2010 Tax Relief Act renews the credit for two years, through Dec. 31, 2011, and includes all amounts paid or incurred after Dec. 31, 2009.
The Jobs Act enhanced the provision excluding gains on sales or exchanges of small business stock from income taxes. For stock acquired between Sept. 27, 2010, and before Jan. 1, 2011, and held for at least five years, the Jobs Act allowed a 100 percent exclusion on gains realized when sold. The 2010 Tax Relief Act extends that 100 percent exclusion for one more year, for stock acquired before Jan. 1, 2012.
The Work Opportunity Tax Credit (WOTC) is intended to encourage employers to hire individuals from targeted groups. The WOTC is equal to 40 percent of up to $6,000 of the targeted employee's first-year wages. Although the credit was scheduled to expire after Aug. 31, 2011, the 2010 Tax Relief Act extends the WOTC for individuals who begin work after Aug. 31, 2011, and before Jan. 1, 2012, with some modifications.
Mark E. Battersby is a writer in Ardmore, Pa.