March 25, 2010 12:00 am

New Jobs Bill Has Breaks for Businesses

The Hiring Incentives to Restore Employment (HIRE) Act, which was signed into law on March 18, 2010, contains tax incentives for businesses to hire new workers and other tax breaks.

Hiring Incentives

An employer who hires a new worker after February 3, 2010, and before January 1, 2011, won’t have to pay any of the employer share of Social Security taxes on wages paid to this worker. This is a 6.2% savings for the employer that would otherwise be due on wages up to $106,800. The break applies only to a new employee who has been unemployed for at least 60 days and who certifies this to the employer on an IRS form that’s now in development.

An employer still pays the employer share of Medicare taxes (1.45% on all wages) and withholds from the employee’s pay the employee’s share for both Social Security and Medicare taxes.

An employer who keeps a new worker on the payroll for 52 consecutive weeks can claim a tax credit of up to $1,000.

Both incentives apply on a per-employee basis; there is no limit on the number of employees who can entitle an employer to these breaks.

Higher Expensing Limit

The cost of equipment and machinery purchased in 2010 can now be expensed (deducted) up to a total of $250,000 rather than being depreciated over a number of years. The dollar limit had been set to be $134,000 for 2010, but the 2009 limit of $250,000 has been retained for one more year.

The dollar limit is reduced by each dollar that purchases in 2010 exceed $800,000, so no expensing is allowed if purchases for the year are $1,050,000 or more.

Source: HIRE Act

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Tax Glossary

Residential rental property

Real property in which 80% or more of the gross income is from dwelling units. Under MACRS, depreciation is claimed over 27.5 years under the straight-line method.

More terms