New Tax Relief for Small Businesses and Self-Employed Individuals

There are various new tax relief credits and deductions that are available to small businesses. These are an ideal opportunity for any small business to reduce their tax liabilities. Some of these available tax relief options are explained here:

Small Business Healthcare Tax Relief

One of the new and major tax credits is the Small Business Healthcare Tax Relief. This tax credit is given to small businesses and small charities that employ a fair number of low income earning employees. The credit allows for such qualifying organizations to receive a tax break for the premiums that they have paid for their employee’s Healthcare. This tax credit runs from 2010 to 2013. The qualifying tax credit amount is a maximum of 35% of the premiums paid in a tax year for small businesses and a maximum of 25% for qualifying tax exempt nonprofit organizations. However, for the two qualifying years after 2013, the tax credit will be a maximum of 35% for qualifying nonprofit organizations and 50% for qualifying small business. The credit is set such that the smaller businesses and nonprofits with less than 10 full time employees and paying a wage-average of $25,000.00 annually get the greatest tax credit (the credit reduces for larger businesses and nonprofit organizations). For a small business or nonprofit organizations to qualify for this Healthcare tax credit, they must have a maximum of 24 full time employees and must also have a maximum annual average wage of $49,999.00.

Tax Deduction for Healthcare Cost of Self-Employed Individuals

The tax deduction for self-employed individuals who pay for their own Healthcare is another new tax relief that takes effect in 2011. The tax relief is part of the Small Business Jobs Act of 2010. Under this relief, the self-employed individual may reduce the taxable income for a given tax year with the premiums paid for his or her healthcare. The Healthcare coverage needs to be registered under the business name of the self-employed.

Tax Relief on Capital Expenditure for Small Businesses

This tax relief enables small businesses to claim the expense costs incurred in purchasing certain business assets under IRS Schedule 179-Property. Ideally, such expenses should be depreciated over several years. However, with this tax relief, a business can claim expenses up to $500,000.00 of the first $2 million of the cost of the property. The tax relief applies for both tax years 2010 and 2011. Come 2012, the allowed maximum that a business can deduct for capital expenditure will come down to $125,000.00.

Bonus Depreciation Tax Relief

Besides the 179-property relief, a small business can also deduct a bonus depreciation of 100% of the cost of qualifying assets if such assets were purchased after September 8, 2010 and put into use before January 1, 2011

Limitation on Car Expenditure

For business cars, there is a cap on the total amount of deductions that you can place both under the 179- Property tax relief and the bonus depreciation relief. For passenger cars, the total amount of deductions you can make in the first year of purchase is $11,060.00 and if you did not deduct the bonus depreciation relief, it goes down to $3,060.00. For trucks and vans, the maximum amount that you can deduct after making the bonus depreciation deduction is $11,160.00 and if you did not take the bonus depreciation deduction, you can deduct a maximum of $3,160.00 on the first year of purchase.