2013 Small Business Tax Deductions, Bonus Depreciation and National Transportation Projects

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[Update Jan 2013] Congress and the Obama administration have reached an agreement that will extend a number of small business tax breaks through 2013 following the fiscal cliff deal which was legislated through the Taxpayer Relief Act of 2012. You can see details of the extended tax breaks in this article.

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[Update Sep-Oct 2010] Obama’s Small Jobs Bill has been approved and you can find more details in this post.

In an effort to provide a sustained job creation program, President Obama called for Congress to approve major upgrades to the nation’s roads, rail lines and runways — part of a six-year plan that would cost tens of billions of dollars and create a government-run bank to finance innovative transportation projects. He also wants to allow businesses to deduct from their taxes through 2011 the full value of qualified capital investments, from computers to utility generators, to boost demand for goods and create jobs.

“We used to have the best infrastructure in the world and we can have it again. We want to reform the way we fund and maintain our infrastructure to focus less on wasteful earmarks and outdated formulas, and we want competition and innovation that gives us the best bang for the buck,” Obama said, adding “this is a plan that will be fully paid for, it will not add to the deficit over time – we’re going to work with Congress to see to that.”

Small Business Capital Tax Deduction – 100% Expensing or “Bonus Deprecation”

By allowing a 100% deduction of capital investments, businesses of all sizes will be allowed to keep more money now and would give large corporations, many of which are sitting on cash due to uncertainty about the economy, an incentive to spend and invest; thereby creating new jobs. This measure, an expansion of a previous tax incentive designed to encourage businesses to invest in equipment, would cost an estimated $200 billion in revenues though the ultimate net loss would be $30 billion over 10 years, according to administration officials, since businesses would eventually deduct the depreciated value of the equipment in any case. A draft paper on the proposal permitting businesses to write off the full costs of capital spending in 2010 and 2011 said it “would be the largest temporary investment incentive in American history.”

The provision also seeks to expand and make permanent a tax credit for corporations’ research and development expenses; for three decades the credit has been enacted temporarily given its revenue cost and then always extended, but with frequent lapses that frustrate businesses.

Transportation Projects Stimulus Spending

The transportation or infrastructure stimulus calls for a quick infusion of $50 billion in government spending that White House officials said could spur job growth as early as next year — if Congress approves. The plan includes rebuilding 150,000 miles of roads; building and maintaining 4,000 miles of rail lines and 150 miles of airport runways, and installing a new air navigation system to reduce travel times and delays. Central to the plan is the president’s call for an “infrastructure bank,” which would be run by the government but would pool tax dollars with private investment to focus on paying for national and regional infrastructure projects.

President Obama will soon outline more details on the above proposals, including more stimulus ideas, and I will update this post as more details emerge. You can subscribe (free) via Email or RSS to get the latest updates.

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17 Comments on "2013 Small Business Tax Deductions, Bonus Depreciation and National Transportation Projects"

[…] Depreciation. The bonus depreciation provision enables small businesses to recover the costs of qualified new equipment faster than the […]

[…] Extending the 100-percent bonus depreciation provision through 2012. (See more…) […]

[…] cuts for companies that hire workers – Following his 2010 proposal for small business‘ to hire workers Obama is likely to renew his push for Congress to extend the “Bonus […]

Jeff Godl
According to the Tax Policy Center – here’s how the bonus depreciation is rated. Providing temporary increases in depreciation allowances for certain equipment and software investment has become a staple of economic stimulus proposals. More generous depreciation deductions reduce the after-tax cost of investing, encouraging higher levels of investment spending by taxable businesses. The temporary nature encourages firms to accelerate otherwise planned investment spending forward when the economy is in most need. Furthermore, by merely changing the timing of tax deductions, bonus depreciation can deliver a large short-term “bang” for a relatively low long-term “buck.” However, economic research suggests that bonus depreciation enacted in 2002 and 2003 had relatively modest effects (CBO 2008). There are at least three reasons why: Businesses may have expected that Congress would extend the provisions, thus blunting their incentive to speed up investment. It takes time for businesses to make major investments, making it hard… Read more »
Raj
I was reading the news re. Obama’s Small Business Accelerated Depreciation…100% Expensing of Capital Items Anyway if you were planning to do a blog on it, you can compare to Australia’s experience I honestly believe one of the major factors that kept Australia out of recession was the “Investment Tax Break”. Australian Businesses still claimed normal depreciation on any depreciable asset However Smalll Businesses got a 50% bonus deduction (on top of normal depreciation) on any asset over $1000 Larger Businesses (turnover over $2mil) got a bonus deduction of 30% (on top of normal depreciation) for anything over $10,000 From my experience it got a lot of businesses to bring forward capital expenditure, Thereby stimulating the economy AND improving long term productivity From my understanding – I think the Obama version is flawed, as there is no major incentive to bring forward investment Yes you get tax deduction straight away… Read more »

[…] Andys2i [Update] Following on from President Obama’s plans to help small business, the U.S. Senate approved legislation ( H.R. 5297) to cut taxes and ease credit for small […]

David

Bama is so desperate now. I guess that we have to wait for several years to recover even after bama is gone.

rick

well if we get bush back your looking at about 30 years . He got us into this mess David unless you have been sleeping these last 12 years .

Margie

Even if Congress quickly approved the program, it would not produce jobs until sometime next year. That means the proposal’s only pre-election impact may be a political one as the White House tries to demonstrate to voters that it is working to boost the economy and create jobs.

SamSmall
There is something cancerous in the argument that President Obama is anti- rich and anti-wealth. A lie anxiously and avidly promulgated by the hoarders of our National Wealth. Wealth is never created in a vacuum. It takes a nation of people – working people- to create wealth. The upper classes of any society have always balked at admitting this fundamental truth as well as their dependence on the power of production of the working classes – blue and white collar. You can see the blazing ego centrism of the promulgators of the trickle down economics theorem: The statement claims that without the rich and financially privileged upper class, our country is doomed. They are the ones with their lies and propaganda being spineless Republican wits to spew their vitriol for them. Wake up America -without exploiting the working people with fear, threats and all manner of intimidation ( like we… Read more »
Ernie
The problem is that is the exact opposite of what this country’s economy needs to recover. It’s really a catch 22 if you will. We don’t spend the economy does not grow. Remember the oil companies provide jobs from the guys on the oil rigs down to the person working at the service station/quickie-mart. Combine that with typical American greed and the price of fuel will go up and we will pay for it because we now have jobs. Most people out there will be rich for the moment and not realize that these jobs Obama is wanting to create are not long term jobs that “could” be created by small and big businesses alike, but relatively short term jobs by comparison. Once again Obama is playing us for fools as he did with his string of broken promises in 2008 to try to get us to vote Democrat in… Read more »
Composer
Some people do have to drive to work. There are also a lot of people who drive to work because it is easier than walking, biking, or taking a train. When I lived in Buffalo, I started biking to school and work every day from April – November, a modest 8 mile ride. In the winter, I left earlier and took subway & bus instead of driving. When I calculated it out, I saved over $2000 per year. I’m always amused by so-called fiscal conservatives in this country who want the government to stop spending money, but are too lazy to figure out how to conserve their own. How did giving oil and gas companies massive tax breaks become ‘fiscally conservative’ anyway? When a true fiscal conservative candidate presents themselves, they won’t stand a chance of getting elected. There are no fiscal conservatives in our government right now. The Republicans… Read more »
ellen

Money could also be spent for so many worthwhile things. Colleges and Universities struggle, VA Hospitals need improvement, the Parks Service is in desperate need of funds. We need to educate more nurses and doctors (there is a shortage). There are a miryad of things that need to be improved in this country.

Justyn

He complains that the GOP won’t agree with him, but wouldn’t work with the GOP when it came to his health care bill.

There were many other instances, but that one is the biggest.
Now that the Senate doesn’t have the 60% to pass through his agenda, he can only name call.

How about proposing something that isn’t loaded with special interest payoffs?
This guy is only a single term president anyway and he just wants to make sure our economy is totally dead before he leaves office.

I would have a lot more respect for him if he wasn’t so set in his socialist agenda. Our government is a give and take. He only wants it one way, his way. What will he do when the dems lose the house?

I would hope that he would actually work with the GOP, but he is so arrogant, he’ll just go back to the Blame Bush statements.

Fred Pryor

Woof, Woof Mr Obama. People talk about you like a dog because you bark louder than you bite. Get some real immediate reform in and the right will respect you more. All talk and no action makes you a lazy…

Verson

It was “Stimulus” and “Bailouts” that turned a recession into the Great Depression decades and it is Stimulus and Bailouts that are turning another recession into another Great Depression.

Philly

Like a terrible remake of Groundhog Day, the White House has unveiled yet another so-called stimulus scheme

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