No Better Time for Small Business Start-Ups

In these tough financial times, more and more unemployed are taking matters into their own hands. Instead of continuing to seek re-employment, they are the nation's new self-employed.

As a small business owner myself, I know the perils as well as the pleasures of being an entrepreneur. For those considering starting their own small business, last year's enactment of the Small Business Jobs Act and provisions of the Tax Relief Act of 2010 should provide better access to business credit and additional tax breaks.

Among the 16 new tax cuts, which are already effective, is an expansion of the benefits of Section 179 property . Eligible Section 179 property can be expensed rather than treated as a capital expenditure and depreciated over time. The new law increases the amount that can be expensed and extends eligible property to include certain qualifying real property.

Under the new rules, some entrepreneurs can now deduct the cost of health insurance for both themselves and their families for the purposes of calculating self-employment tax. A small business owner may not take the deduction if the owner or spouse qualifies to participate in an employer-sponsored health care plan, whether they actually participate or not.

The act also increases the deduction limitation for start-up business expenses from $5,000 to $10,000. The phase out threshold, the point at which the deduction is reduced dollar for dollar, is $60,000.

For the 2010 tax year only, a wide-range of business tax credits can be used to not only offset regular income taxes but to offset the alternative minimum tax.

In order to encourage investors to financially back new business start-ups, the law provides tax benefits for investments in qualifying small businesses. For those investing in qualifying small businesses and holding those investments for at least five years, gains will be 100% excluded from capital gains taxes. The first year to claim this exclusion is the 2015 tax year.

Qualifying small businesses include corporations whose stock is not traded publicly. In addition, qualifying small businesses can be partnerships and sole proprietorships. The business must have less than $50,000,000 in average annual gross receipts for the previous three tax years.

In addition, the law increases both loan limitations and funding availability for Small Business Loans. The financial support given the Small Business Administration for working capital loans is intended to enable entrepreneurs to create new jobs.

This is only a small sampling of the benefits provided by the Small Business Jobs Act and the subsequent measures of the Tax Relief Act of 2010. Some are permanent changes to tax law, others are temporary benefits. Combined they make 2011 a prime time to start that new small business.

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