Self-employed and micro-businesses such as home-based travel agents are often overlooked by lawmakers when it comes to policy, but that may be about to change. The Senate is considering legislation called the Small Business Jobs Act of 2010 (H.R. 5297), which contains key provisions that may help America's smallest businesses in this difficult economic climate, according to the National Association for the Self-Employed (NASE).
A long-standing priority for NASE has been included in the Small Business Jobs Act: allowing the self-employed to take a one-year business deduction for health-care costs. Sole proprietors are unable to deduct their health insurance costs as a business expense, leaving them to pay more in payroll (self-employment) taxes than any other business. NASE has been working for many years to allow the self-employed to receive the same tax treatment of health insurance costs as all other business entities. While NASE has been working to permanently correct this inequity in the tax code, the one-year deduction in the Small Business Jobs Act is an important first step in leveling the playing field for the 23 million self-employed Americans.
To further address the needs of the nation's smallest businesses, Sen. Barbara Boxer (D-CA) has offered a vital amendment to the bill, S. Amdt #4430, which helps simplify the tax code for home-based businesses. With over half of all small businesses being run out of the home, the home office deduction is an important tax benefit for small businesses. Unfortunately, the complexity and paperwork burden associated with the home office deduction drives many qualifying business owners to forgo this tax assistance. S. Amdt. #4430 would create the option of a standard home office deduction, allowing eligible business owners to avoid the complex calculations and simply opt for the standard deduction amount. NASE is strongly urging passage of this amendment.
"Congress and the Administration give a lot of lip service to small business in regards to rebuilding the economy," remarked Kristie Arslan, executive director of NASE's Legislative Offices. "But here are two key proposals that would make a tangible difference in their bottom line. For a one- to two-person company, small tax benefits turn into real cash that can actually facilitate business growth."
Other key provisions included in the Small Business Jobs Act, which will provide entrepreneurs with a boost, include:
* Increased deduction for start-up expenses; currently, entrepreneurs can deduct up to $5,000 of expenses with a $50,000 phase-out. The bill would increase the deduction to $10,000 with a $60,000 phase-out threshold beginning in 2010.
* Increase of Section 179 expensing to $500,000 with a phase-out threshold of $2 million in 2010 and 2011.
* Creation of a Small Business Lending Fund that would provide federal funding to community banks, credit unions and community development loan funds to increase small business lending.