Small Business Tax Incentives Included in Fiscal Cliff Deal

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This week, the Small Business Administration provided information on small business tax incentives in the Taxpayer Relief Act of 2012, better known as the “fiscal cliff deal.” In a blog posting, SBA Administrator Karen Mills underscored the agreement’s benefits for small businesses and said that it “delivered some really good news.”

The fiscal cliff deal extends several small businesses tax incentives designed to spur innovation, support capital investment, and make it easier to hire new workers. The legislation also encompasses “some of the most important tax credits that the President signed into law during his first term,” Mills wrote.

Among the key tax incentive extensions in the bill are:

  • Section 179 Deduction. Section 179 of the tax code permits small businesses to deduct the cost of certain new and used property placed in service for the year rather than depreciate those costs over time. The new law extends the maximum deduction to $500,000 for the 2012 and 2013 tax years for companies with under $2 million in qualifying capital expenditures.
  • Bonus Depreciation. The bonus depreciation provision enables small businesses to recover the costs of qualified new equipment faster than the ordinary schedule, by permitting the depreciation of 50 percent of the cost in the first year. The provision was set to expire at the end of 2012, but has been extended through the end of 2013 (and 2014 for certain types of property).
  • Work Opportunity Tax Credit. The new law extends through 2013 the tax credits for employers who hire military veterans or individuals from underserved communities that have faced barriers to employment.
  • Other Small Business Tax Credits. There are a handful of other targeted tax credits that were extended for 2012 and 2013, including: the new markets tax credit for businesses that invest in certain community development entities and other qualified investments; a reduction in the recognition period for S-corporation built-in gains tax; and a reduction in the time from 39 years to 15 over which a business can recover the cost of certain leasehold improvements and restaurant and retail property; among other targeted provisions.