Tax Breaks In Obama’s $15 Billion Small Business Plan

There is little doubt that small businesses are the heart of the American economy. They have created roughly 70 percent of new jobs in the last decade, and are the key to reversing current unemployment trends and getting the nation out of recession. With this in mind, President Obama revealed his $15 billion dollar plan to help small businesses all over the country. Here are the key elements and how your new or existing business can benefit (pay particular attention to the tax breaks):

- The 21 largest banks receiving government money must report monthly (while others receiving taxpayer money need to report quarterly) on how much lending they do to small businesses. A government website will be setup to make this information public, so check how your bank is doing. If they are proving difficult in providing loans, switch to one that is more accommodating. The data will give you the information you need to shop around most effectively.

- Immediately reduce small-business lending fees and to increase government guarantees on some SBA loans. The Small Business Administration (SBA) currently guarantees payment on 85 percent of a loan up to $150,000, and as much as 75 percent on loans of more than $150,000. The administration is raising the guarantee to 90 percent, reducing lender risk, and waiving fees of as much as $75,000 that are paid by borrowers. This will be funded via $730 million from the recently passed stimulus plan.

- The government will take aggressive steps to boost bank liquidity with up to $15 billion aimed at unfreezing the secondary credit market - this is where most commercial and small business loans are made. Where needed the government will step in to buy small business loans to help unlock the frozen credit market.

- Small business owners will be able to borrow as much as $2 million with enhanced government assurances. Companies in need of financing for big economic development projects will have a guarantee on as much as $4 million in loans, under the plan.

- The IRS will also issue a series of new rules for temporary but significant tax breaks, meaning that small businesses:

That earn up to $15 million will be allowed to claim losses for the past five years in the current tax year;

May write off up to $250,000 in investments this year.

Can reduce estimated tax payments to 90 percent of the previous year’s filing.

Are allowed to take larger depreciation deductions within the first year of property purchases.

Will see 75 percent of capital gains excluded for those who invest in small businesses.

Overall, these measures should provide a boost but $15 billion seems a small amount, especially when compared to the $700 billion stimulus and TARP plans. However, as a small business owner the key benefits will come from the tax changes. Make sure you discuss these with your accountant at your next meeting and plan to take advantage of the new provisions.

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