New tax provisions will help many small businesses

The recently passed Small Business Jobs Act offers a number of helpful changes to the tax law that will benefit small business owners. As with most bills, there are many provisions, and some of them are very complex. But I just wanted to point out two basic provisions that will be welcomed by many small business owners I work with:

1) Cell phones have been removed as “listed property.” OK, so if you’re not a tax professional, what on earth does that mean and why is it such great news? This means that deducting cell phone usage as a business expense will no longer be an enormous pain. When cell phones were listed property, the tax code required records to be kept of all calls that were made and their business purpose. This means that if you followed the letter of the law you’d have to get a detail bill and go through the bill call by call to determine how much of your bill was a deductible business expense.  No more. Now cell phone expenses can generally be deducted as simply as any other business expense. (Of course, this is bad news for those cell phone companies which annoyingly charged an extra monthly fee for detail billing. Sorry Verizon, etc…)

2) Health insurance for Self-Employed individuals can be deducted as a business expense. The self-employed have long been able to take a deduction for their health insurance. However, the deduction was only allowed against income tax, but not against the Self-Employment Tax, which is generally about 15% of net business income. In 2010 (and only 2010, unless this provision is extended later), the self-employed will be able to deduct their health insurance against income tax and the Self-Employment Tax, generally resulting in a tax savings of about 15% of your health insurance costs.

There are many, many more provisions to this bill. For more information, you can view this page at whitehouse.gov that provides a broader overview: http://www.whitehouse.gov/blog/2010/09/27/president-obama-signs-small-business-jobs-act-learn-whats-it

Of course, this is general information and it’s always good to consult with a qualified tax advisor to determine how these provisions apply to your specific situation.

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