New Tax Incentives are Good for Small Business

The Taxpayer Relief Act of 2012, an agreement soon to be signed into legislation, provides an extension of some of the most important tax credits signed into law during the President’s first term — thereby avoiding a negative impact on small business revenues. These extensions include several small business tax incentives designed to incite innovation, support capital investment, and make it easier for small business owners to hire new workers. It offers key benefits for more than 98 percent of Americans — and in particular for the country’s 28 million small businesses that will not see their income taxes go up.

“Considered the backbone of our economy, 97 percent of small businesses will continue to receive tax credits for the research that they do, the investments they make, and the clean energy jobs that they create,” said President Obama as he described the agreement.


As small business owner you may stand to benefit from one or more of the following extended tax incentives:

  • Bonus Depreciation Provision: This 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. It makes it possible for 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.
  • Research & Experimentation (R&D) Tax Credit:  Popularly known as the R&D credit, this law extends the research and experimentation tax credit which had officially expired at the end of 2011, through 2013.  Additionally the law allows businesses to apply the credit retroactively to investments made in 2012.
  • Section 179 Deduction: This 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 under Section 179 of the tax code.
  • Work Opportunity Tax Credit: Tax credits for the new law extends through 2013 for employers who hire military veterans or individuals from underserved communities that have faced barriers to employment.
  • More Small Business Tax Credits: Some other targeted tax credits that were extended for 2012 and 2013, include:
    • 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;
    • 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.

If you still have questions about these and other tax credits and incentives, you may find the answers in a list of some of the most important facts about the new tax deal available online at

The SBA (Small Business Administration) is also a source of good news for America’s small businesses. Its support for entrepreneurs comes in the form of providing opportunities and local assistance in communities all over the country. Visit the SBA website to get info on starting a business, getting a loan or obtaining counseling, training and mentoring.