Tax

Uncertainty is the best way to describe tax rules for 2010 and beyond, making it difficult for you to plan effectively for your business. Some things are certain, allowing you to make business decisions now, but other plans will have to wait until Congress acts.

New rules for vehicles
If you drive your personal car or truck for business and opt to deduct costs based on the IRS standard mileage rate (rather than your actual costs), note that the rate for 2010 is much lower than it had been for 2009. The 2010 rate is 50 cents per mile, down from 55 cents per mile in 2009.

For those who purchase a new vehicle in 2010, the IRS has yet to announce depreciation limits. (These probably will not be available until February). However, based on projections that do not foresee an extension of bonus depreciation rules, expect the dollar limit for a car to be $3,060 and for a truck or van to be $3,160 (up slightly from 2009 levels).

Action: Make a note of your vehicle's odometer reading at the start of the year and keep track of business usage of the vehicle throughout the year so you will be able to optimize your deduction for vehicle usage.

New retirement plan rules
If you already have a 401(k) or other qualified retirement plan, be sure to note that contribution limits remain the same for 2010 as they were in 2009. Thus, the top contribution to a SEP for 2010 is $49,000.

There is a new retirement plan option available in 2010, and businesses with existing plans and those with no plans might consider this new option, called a DBk. It combines a modest defined benefit (pension) plan with a 401(k)-like option. As the year progresses, look for financial institutions to start offering DBk products.

Action: To help you determine which type of plan is best for you, visit the IRS Retirement Plan Navigator and click on "Choose a Plan."

New health plan rules
While Congress is in the midst of finalizing a health care package, some rules are certain to apply in 2010. Health savings accounts (HSAs) are a way for small business owners to provide affordable health coverage for themselves and their staff and there are new contribution limits for 2010. The annual contribution limit for self-only coverage is $3,050; it's $6,150 for family coverage. The contribution can be increased by $1,000 for each person age 55 or older by the end of the year. Thus, if a self-employed person, age 58, with a spouse age 56, has family coverage for 2010, the contribution limit in this case would be $8,150 ($6,150 + $1,000 + $1,000).

To be eligible to make an HSA contribution, a person must be covered by a high-deductible health plan. In 2010, this is a policy that has an annual deductible of at least $1,200 for self-only coverage and $2,400 for family coverage.

If you provide an HSA for your staff and make the contributions, they are deductible and are not subject to FICA and FUTA taxes.

Expired provisions
A number of important business-related tax rules expired at the end of 2009. At the time we went to press, the House has passed a bill that would extend some of them for one year; the Senate will probably pass a similar measure early in 2010 and make the changes retroactive to January 1, 2010. Key extenders include:

• Research credit
• 15-year amortization of qualified leasehold, restaurant, and retail improvements
• Expensing of environmental remediation costs
• Employer credit for wage differential payments to employees called to active duty
• Enhanced deductions for charitable donations of food inventory, book inventory, and computer technology

Note: The $250,000 limit on first-year expensing (Sec. 179 deduction) expired at the end of 2009 and is set to be $134,000 for 2010. This provision is not part of the House's extender bill, but retention of the higher limit may become part of a jobs package or other legislation.

Action: Meet with your tax advisor as soon as possible to help create tax-saving strategies for your business in 2010.