Opening or maintaining a small business in the current economy can be a difficult and expensive undertaking. With more small businesses declaring bankruptcy or being forced to lay off workers to remain profitable and reduce their costs, entrepreneurs are struggling to stay afloat. But a number of small business tax deductions may help owners reduce their tax liability, saving them money. Some tax benefits are set to expire in 2010 or in later years.
For example, entrepreneurs who have started a business in 2010, or plan to, may be eligible for a $10,000 tax deduction for all start-up expenses, according to Bloomberg. The tax benefit allows new small business owners to deduct anything that may be considered a start-up expense, from marketing and promotional to accounting costs. The deduction is double the amount of the usual benefit available to entrepreneurs in previous years. However, the doubled benefit is only valid for 2010.
The tax deduction for capital expenditures has also been raised during 2010 and 2011. Businesses can now write off up to $500,000 - up from $250,000 - for fixed asset expenses, such as computers, machinery and operating equipment, Bloomberg reports. Companies who bring in more than $2 million in revenue will see the deduction phased out.
"Shifting income and timing deductions is always a challenge. But for companies that were looking to expand, this provides an incentive for them to do it now," Kaufman Rossin accounting firm principal Scott Berger told Bloomberg.
Small businesses planning on hiring more workers should also take advantage of the HIRE Act Tax Exemption, which will allows owners who hire individuals previously unemployed for 60 days or more to receive tax benefits. Employers will be able to exempt employee wages from the company's 6.2 percent share of Social Security payroll taxes for the remainder of the year. Owners who retain a new hire for a one-year period will also be eligible for a $1,000 tax credit per employee.
Small business owners should set up a meeting with their tax preparers before the end of the year to determine whether they qualify for the deductions and find out about other benefits for which they may be eligible.
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