Tax Relief Act of 2010: Business and Self-Employed Individuals

If you're an employee, 6.2% of your covered wages up to the taxable wage base ($106,800 in 2011) is generally withheld for your portion of the Social Security retirement component of FICA employment tax. If you're a self-employed individual, you pay 12.4% for the Social Security portion of your self-employment tax. The Act implements a one-year 2% reduction in this tax. That means for 2011, you'll pay the tax at a rate of 4.2% if you're an employee, and 10.4% if you're self-employed.

If you're a business owner or self-employed individual, you may know that an additional 50% depreciation deduction has been available for qualifying property placed in service during 2010. The Act increases the bonus depreciation percentage allowed to 100% for property acquired and placed in service after September 8, 2010, and before January 1, 2012. The Act also extends bonus depreciation at the 50% level through 2012 (the 50% bonus depreciation will apply for property placed in service after December 31, 2011, and before January 1, 2013).

For tax years 2010 and 2011, the Small Business Jobs Act increased the maximum amount that could be expensed under IRC Section 179 to $500,000 and increased the phaseout threshold amount to $2 million. For 2012, the dollar limit amount and phaseout threshold level were scheduled to drop to $25,000 and $200,000, respectively. This Act sets the IRC Section 179 expense limit for 2012 at its 2007 level — $125,000, with a phaseout threshold of $500,000 — indexed for inflation.

Before Act After Act
"Bonus" depreciation 50% additional first-year depreciation allowed for 2010, no bonus depreciation beginning in 2011 100% bonus depreciation for property acquired and placed in service after 9/8/10 and before 1/1/12; 50% bonus depreciation allowed for property acquired and placed in service after 12/31/11 and before 1/1/13
IRC Section 179 expensing For 2010 and 2011, $500,000 expense limit, reduced by amount by which cost of qualifying property placed in service during the year exceeds $2 million; beginning in 2012, limit would be reduced to $25,000 with $200,000 phaseout threshold 2010 and 2011 unchanged; for 2012, the limit will be set at $125,000, reduced by amount by which cost of qualifying property placed in service during the year exceeds $500,000 ($125,000 and $500,000 amounts indexed for inflation)
Tax credit for research and experimentation expenses Expired at the end of 2009 Retroactively reinstated for 2010 and extended through 2011
New markets tax credit Expired at the end of 2009 Retroactively reinstated for 2010 and extended through 2011
Indian employment tax credit Expired at the end of 2009 Retroactively reinstated for 2010 and extended through 2011

See also:
Summary | Tax Rates | Estate Tax | Gift and Transfer Tax | Business and SE | Tax Credits | Deductions | Other



No information relating to approaches to investing or types of securities and investments you might buy, sell or hold is intended or should be construed as any advice, recommendation or endorsement from us as to any legal, tax, investment or other matter. No reference to any specific security constitutes a recommendation to buy, sell or hold that security or any other security. Nothing in this text shall be considered a solicitation or offer to buy or sell any security, future, option or other financial instrument or to offer or provide any investment advice or service to any person in any jurisdiction. We offer no investment advice or any opinion with respect to the suitability of any security, and the views expressed in this text should not be taken as advice to buy, sell or hold any security. In preparing the information contained in this text, we have not taken into account the investment needs, objectives and financial circumstances of any particular investor. This information has no regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this information and investments discussed may not be suitable for all investors.