Hiring by small businesses has been decreasing in the last two and a half years, contributing to the nation's high unemployment rate of nearly 10%. But now, there's finally some good news for entrepreneurs - and the unemployed.
As of September, 2010, there's a new piece of legislation designed to bolster these businesses. The bill, titled the Small Business Jobs Act of 2010, represents $42 billion in tax cuts, increased loans, and other financial measures. It's estimated that the Act will help create 500,000 new jobs.
So, if you own an eligible business how can you take advantage of the Act, boost your bottom line, and perhaps hire new workers?
Here are a few ways you can benefit from the Act...
Lower Your Taxes with Tax Cuts and Credits
The Act includes a whopping $12 billion in tax incentives small business owners can use to lower their tax burden. As that figure indicates, there's a lot here - but certain provisions are more helpful than others.
For example, the legislation eliminates capital gains tax on particular investments that are held for five years. It also allows owners to write off more investments for 2010 and 2011.
Small businesses can also deduct expenditures on particular investments due to an extension of a Recovery Act provision that allows for a 50% bonus depreciation.
When figuring their self-employment tax owners can now deduct all of their health insurance payments for themselves and their family.
Finally, the bill increases the amount new business owners can deduct this year for any start-up expenses related to their business - from $5,000 to $10,000.
Get Yourself a Loan
The primary goal of the new act is to make it easier for small businesses to procure loans. The Act offers loan money to the owners of small business via several avenues.
First, your local lending institution is likely the beneficiary of some of the $30 billion the Jobs Act funneled into community banks, with incentives to lend to small firms. Head over to your local bank to apply for these higher loans, with more favorable guarantees.
Also, both the 7(a) and 504 loans programs - the two largest of the Small Business Administration - grew substantially under the new bill. The maximum 7(a) and 504 loans were increased from $2 million to $5 million, and the maximum 504 loan in the manufacturing industry jumped from $4 to $5.5 million.
Finally, SBA Recovery Loans have also been expanded under the Act. Last year, Congress passed the American Recovery and Reinvestment Act (the Recovery Act) to aid struggling small businesses. The Jobs Act of 2010 extends some of the money from the 2009 legislation.
A Break on Bureaucracy
The act also reduces paperwork and puts forth less byzantine regulations. This makes it much easier for small business owners to benefit from tax breaks.
Here are the two most exciting ways the bill does this:
1. Before the new legislation, taxpayers were required to complete page after page of documentation to deduct charges for any cell phone they use for work. But the legislation takes cell phones off the Internal Revenue Code's "listed property." This means it's now a lot simpler to deduct your mobile device when used for business.
2. The Act also cuts through red tape by reducing the penalty when filers don't report a transaction deemed by the IRS as an abusive tax shelter. The new limit for the penalty is now 75% of the tax benefit, with a cap of $100,000/individuals and $200,000/corporations.
Now's the Time to Try for a Federal Contract
The legislation is also designed to make it easier for small companies to earn federal contracts.
How does it do this? For one, it makes it harder for the government to clump together contracts.
In addition, it institutes a pilot program to more easily allow small companies to bid together on contracts.
The Act also eliminates the "Competitiveness Demonstration" program. This program was a hardship to small contractors in several industries, including construction and pest control.
And, for even more advantage for the small business owner seeking government work, the bill makes it harder for large firms to win small-business contracts.
Don't Miss Out
If you're a small business owner, now is a great time to invest in business equipment, office renovations, and particularly new hires. And don't forget to meet with your accountant. He or she will help you explore the various ways the Small Business Jobs Act offers welcome tax relief for 2010 and beyond.
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