Small business insurance and the new tax breaks

One of the worst aspects of the current economic reality is the continuing level of unemployment. While it continues at or around the 10% mark, it’s going to depress the amount of money spent on Main Streets up and down the US. People worried whether their next pay check will arrive are preferring to pay down their debts rather than spend. Combine this with the unwillingness of the banks and credit card companies to be more generous with credit limits and you have a perfect storm for small business to weather.

It’s therefore welcome to see the Small Business Jobs Act. No matter what your politics, the idea of $12 billion in tax breaks for business is good news. Whether it will actually do anything to create jobs is anyone’s guess. You will not find a single incentive for hiring a new employee. The government is working on the theory that, if your business makes capital investments, this will eventually create more jobs. Given two-thirds of all new jobs have been created by small business over the last three years and you understand why this breaks are targeted to the smaller businesses.

Starting with the self-employed, your tax bill is going to be lower by about 15% if you pay your own health insurance premiums. The current position is that, if you employ people, the payment of their health premiums is deductible from the gross revenue of the business. But the premium for your own insurance is only a personal deduction. Just for 2010, the premiums will reduce the net earnings from your own employment. There are also changes to the system for claiming tax refunds which now allows you to go back for five years, the start-up costs limit is increased and the repayment period extended, the first year expensing deductions are doubled and the scope is extended to include leased property improvements even though they are not capital equipment, and the depreciation allowances are expanded. Finally, you can now withdraw some of your retirement savings to help cover your immediate trading losses during start-up.

This is only a snapshot picture of a complex set of provisions. Further, more tax changes and breaks will probably appear during the remainder of this tax year. So you had better huddle with your accountant or tax advisor to advise you on how to take advantage of everything on offer. With the Administration on the hook to take action on unemployment, the small business market can expect more help. That some of this will affect small business insurance is inevitable. Just as the health insurance deductions have been modified to encourage more small businesses to maintain adequate plans, you can expect to see more breaks and allowances for investment. This spins off into insurance territory because, if the rate of depreciation on plant and equipment is increased, this writes down the value for insurance purposes, and so on. You may find it worth your while to have an insurance audit at the end of this tax year to ensure you have up-to-date values in place, e.g. on rebuilding costs for property insurance, the replacement of fixtures and fittings, and so on.

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