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Three Last-Minute Tax Deductions

Don't forget these new tax changes when you prepare your 2009 returns.

It's that time of year when you need to break out the calculator, sharpen your proverbial pencil and boot up that new tax software--or at least dial up your accountant. Here's a roundup of a few changes to the tax code that you need to know, courtesy of the American Recovery and Reinvestment Act of 2009.

New From the SBA

President Obama recently announced two new Small Business Administration lending initiatives designed to ease the economic burden on small businesses. Some key facts:

. Expanded working capital:
An initiative that temporarily increases the cap on SBA Express loans from $350,000 to $1 million.

. Refinancing real estate:
This expands the SBA's 504/Certified Development Company program temporarily to support refinancing for small- business owner-occupied commercial real estate loans that are maturing in the next few years.
Five-year carryback on net operating losses. The act brought a provision in tax law that changed how businesses with net operating losses could deduct them for the tax year 2008. That change has been extended to include tax year 2009. The change allows small businesses to offset a net operating loss against income earned in previous years, which may garner them a refund of taxes paid over the last five years.

Before the change went into effect, the carryback was allowed for only two years. Now, small-business owners can elect to go back three, four or five years. To be eligible, small businesses must have an average of no more than $15 million in gross receipts for the last three years. (This is up from $5 million.)

COBRA premium assistance credit. The act also allows a tax credit against certain employment taxes you might have paid. If an employee (called an "assistance eligible individual") who was eligible for COBRA coverage elected it after being involuntarily terminated between Sept. 1, 2008 and Dec. 31, 2009, and the employer assisted in paying the COBRA premium, 65 percent of the employer-paid amount can be reimbursed for a maximum period of nine months. The reimbursement is done as a credit against employment tax liabilities. You'll want to make sure you have appropriate documentation to back up this claim.

Special depreciation allowance. The act applies a special depreciation allowance to new property and equipment placed in service during 2009. The bonus 50 percent depreciation has been extended through 2009 and limits on the section 179 deduction have been increased. The section 179 deduction allows small businesses to deduct as much as $250,000 in qualified property (machinery, equipment, vehicles, furniture, etc.). The way the law is designed, it specifically targets small businesses because most large businesses are not eligible. For more information, visit irs.gov and read IRS Publication 946.

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This article was originally published in the April 2010 print edition of Entrepreneur with the headline: Three Last-Minute Tax Deductions.

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