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Limited Lame Duck Produces Mixed Bag of Results for Small Business
From the National Federation of Individual Business (NFIB) MyBusiness Magazine: http://www.nfib.com/mybusiness-magazine/myvoice-in-dc
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As the 111th Congress adjourned, there was finally some good news on tax rates and federal spending. For the past year, small business owners have pleaded with Congress to give them some certainty on taxes, and the results of the November 2nd election have finally begun to have an impact on the direction of Congress.
While NFIB strongly supports a permanent extension of all the current tax rates, Congress did reach an agreement with the White House to extend all the rates for another two years. While not an ideal solution, it will ensure that no small business owner is hit with a tax increase in 2011. In addition, the compromise bill included a two-year fix to the estate tax, which was set to roar back in January with a 55 percent tax rate and only a $1 million exemption.
Here is a rundown of the tax provisions that have been extended for the next two years:
All current individual rates stay the same.
Capital gains and dividend rates will both remain at 15 percent.
The estate tax will be set at a rate of 35 percent, with an exemption of $5 million per spouse.
No increase in the alternative minimum tax.
Business expensing:
- 100 percent deduction for qualified business investments (like equipment) in 2011. Just about every small business can write off the full amount of investments they make in 2010 and 2011.
- Builds on expanded expensing limits passed in September, allowing small businesses to immediately deduct up to $500,000 in investments—including up to $250,000 for renovations.
Every worker (including small business owners) in the United States will see a 2 percent payroll tax cut in their Social Security payroll tax in 2011.
Small business scored a big fiscal victory when the White House and Senate Majority Leader Harry Reid backed down on their attempt to pass another bloated spending bill. The failed bill contained nearly 7,000 earmarks that totaled approximately $8.3 billion, and included $1 billion in new federal spending to begin implementation of the new healthcare law. Once this bill was withdrawn, the Senate agreed to a temporary spending bill with no funding increases or earmarks and a freeze on all federal civilian salaries for two years.
