Small Business Provisions for the HIRE Act

Two weeks ago President Obama signed into law the HIRE (Hiring Incentives to Restore Employment) into law. Drawing less coverage than the highly publicized healthcare legislation, the HIRE Act provides several tax incentives designed to get businesses hiring the unemployed and making capital purchases. Here is a rundown of the three key provisions affecting small business:

  • Social Security tax forgiveness of 6.2% on wages paid between March 18th and the end of the year to qualifying individuals. A “qualifying individual” is a person hired after February 3rd who was previously unemployed for 60 days or more. The maximum payroll tax savings per employee is $6,621. Limitations apply to “replacement” employees and new hires related to the owners of the hiring employer.
  • A retained worker business credit up to $1,000 if the qualifying individual remains employed for 52 consecutive weeks. The credit is all or nothing in that there is no partial credit for a qualifying individual remaining on the payroll for a period less than 52 weeks. Domestic employees do not qualify.
  • Enhanced business expensing (Section 179) provision extended for 2010. Section 179 has been a key element of tax planning for several years in that it allows businesses to expense qualifying capital purchases in the year of purchase rather than depreciating those purchases over several years. The enhanced Section 179 rules allow businesses an immediate tax deduction for up to $250,000 in qualifying capital purchases. The deduction is limited to business income for the year and is reduced dollar-for-dollar by qualifying purchases over $800,000.

Still on the legislative horizon are a retroactive estate tax reinstatement, an alternative minimum tax patch, and an extension on many other popular tax benefits. We will keep you posted on these developments.