Listeners to The American Entrepreneur’s December 4 show heard TAE’s favorite accountant, Dave Wilke of Wilke and Associates, break down some great new tax laws, enacted by Congress in October of 2004, that can put a little money back in the pockets of many small business owners.

The Jobs Creation Act is being hailed as one of the largest tax revisions in years, yet few seem to be aware of it. The move was designed to curtail the increasing practice of corporations which took advantage of significant tax breaks by dealing overseas.

As a result of this act, there are four major aspects that a small business owner would be wise to consider:

1. The Domestic Producer Credit:The Jobs Creation Act allows for a three percent (3%) tax rate credit for Corporations, S-corporations, Limited Liability Corporations, Limited and General Partnerships. Generally, the credit will cover “production activities”, which will cover such areas as construction, manufacturing, architecture. For the pass-through corporations, this credit essentially goes directly to that owner him- or herself.

2. Increase in the Allotted Expense Amount: With the Jobs Creation Act, up to $102,000 of purchases can be written off as corporate expenses, an increase of $2,000. (For perspective, as recently as 1993, this cap was only $25,000.) This can cover anything from office equipment, computer software or hardware, so long as said expenses are for business purposes only.
   (One sidebar adjustment is the establishment of a $25,000 cap for S.U.V’s, to be used for business purposes. Previously, there had been no such cap…closing of the noted “S.U.V. loophole”, perhaps?)

3. Adjustment of Depreciation for Commercial Lease-Hold/ Building/Restaurant Improvements: The amount of years for depreciation for these improvements has been drastically reduced from 39 years to 15 years. This will reduce the delay in the deduction of the investments in “bricks and mortar”.

4. Writeoff of Start-up Costs: The process of starting up a business incurs a number of costs on its own, from incorporation costs to acquistion of a bank loan, and related fees along the way. With the Jobs Creation Act, the initial $5,000 of these costs can be written off, much like a standard business expense, and unlike a depreciable item.

As always, for any questions you may have, you are encouraged to consult your accountant for further discussion of these and any issues related to your business. For more information on Wilke and Associates, call them at (412) 278-2200, or check them out online at www.wilkecpa.com.