Starting in 2010
Payroll Tax Credit
For 2009 and 2010, Congress gave workers a credit of 6.2% of their earned income, capped at $400 for single filers and $800 for joint filers. For single filers, it starts phasing out at $75,000 of Adjusted Gross Income and dries up at $95,000. The phaseout zone for couples is $150,000 to $190,000. While employees get the credit in advance via lower income tax withholding in each paycheck, self-employeds can reduce their quarterly estimated payments to get an advance benefit from the credit. The exact amount of the payroll tax credit for the year will be calculated on the filers’ tax returns
Self-Employment Tax Contribution Base Unchanged
The maximum amount of self-employment income subject to Social Security taxes remains at $106,800 in 2010, unchanged from 2009. The self-employment tax rate remains 15.3%.
Social Security Tax Contribution Base Unchanged
The maximum amount of wages subject to Social Security tax remains at $106,800. The tax rate remains 7.65% on employers and employees.
Business Standard Mileage Rate Drops
The standard business mileage rate is 50 cents per mile, down 5 cents per mile from the allowance that applied for business driving in 2009. Remember that you can deduct the cost of parking and tolls in addition to the mileage allowance.
Tax-Free Parking for Employees
Companies can pay for $230 a month of parking tax-free for employees, unchanged from 2009. The cap on tax-free transit passes is now $230 a month as well, the same as for parking.
Bonus First-Year Depreciation
The first-year depreciation bonus that businesses can take on new assets put in use was increased to 100% from 50% for qualified investments made after September 8, 2010, through the end of 2011. In other words, they can write off the entire cost of the asset up front. Smaller firms can first claim expensing and then use the 100% bonus. If you buy used assets, no 100% write-off is allowed.
Assets depreciated over 20 years or less are eligible, including machinery, equipment, land improvements and farm buildings, even leasehold improvements made to the interior of commercial realty. But this special write-off is not available for other buildings. Autos and light trucks also benefit if they are used for business. The maximum first-year write-off for them remains at $11,060. However, this is only for vehicles that are put in service during 2010.
Carrybacks of Net Operating Losses
Businesses with average annual gross receipts can carry back net operating losses from the 2008 and 2009 tax years for a maximum of five tax years. The carryback period is usually two years.
Estimated Tax Relief for Owners of Small Businesses
If an individual’s Adjusted Gross Income for 2009 was less than $500,000, and more than half of gross income was from a business with fewer than 500 workers, the owner’s estimated income taxes for 2010 estimated payments can be based on the lesser of 90% of tax liability for 2010 or 100% of the liability for 2009. The usual estimated tax benchmarks of 100% or 110% of tax liability do not apply.
Wind Energy Credit
The $4,000 annual ceiling on a business tax credit for wind energy turbines was repealed. The credit is for 30% of the cost of wind energy turbines of 100 kilowatts or less.