Aspiring entrepreneurs that have been thinking about starting their own business are in luck if a current House Bill is passed. The Small Business Jobs Tax Relief Act of 2010 (H.R. 5486) would increase the Code Sec. 195 deduction for qualified start-up expenses. The current law allows small business taxpayers to deduct up to $5,000 in qualified start-up expenses with the deduction being reduced by the amount of total start-up costs exceeding $50,000. For tax years beginning in 2010 and 2011, the proposed House bill would increase the start-up expense deduction from $5,000 to $20,000 and the threshold will be increased from $50,000 to $75,000.
The bill is an attempt to spur the economy by allowing small businesses to recover more of their initial start-up investment on the front-end (instead of spreading the expense over many years) increasing their cash flow, and giving them the ability to invest in the economy and hire employees.
We will keep our eyes and ears focused on the developments coming out of Congress for more information on planning to start a small business, be sure to speak with an accountant, attorney, and do your own research at the Small Business Administration and other small business resources.
The Tech Accountant