The Hiring Incentives to Restore Employment Act (HIRE Act) was signed into law by President Obama on March 18. The law includes temporary tax breaks for businesses that hire workers who have been unemployed for at least 60 days, and it extends for one year the higher expensing limit for business equipment purchases.
Hiring incentives. The HIRE Act provides $13 billion in tax incentives to private businesses that hire unemployed workers. Employers can receive an exemption from social security payroll taxes for every qualified worker hired after February 3, 2010, and before January 1, 2011. For new hires kept on the payroll for at least 52 weeks, employers may qualify for a tax credit for each retained worker of the lesser of $1,000 or 6.2% of wages paid during the 52-week period.
The payroll tax forgiveness provided in the law does not apply to the Medicare portion of the tax. Also the new employee cannot displace a current employee unless that employee quit or was fired for cause. Relatives of the employer are not considered qualified employees for these tax breaks.
Increased expensing limits. The 2009 maximum amount that could be expensed for the purchase of new or used business equipment was $250,000, with a dollar for dollar reduction once total equipment purchases for the year exceeded $800,000. The expensing limit fell to $134,000 for 2010, with phase-out set at $530,000. The HIRE Act retroactively reinstates the higher 2009 expensing limits for 2010. This is a one-year extension only, and it does not include an extension of bonus depreciation allowed last year. Off-the-shelf computer software will continue to qualify for expensing for 2010 purchases.
The HIRE Act does not extend the business and individual tax breaks that expired at the end of 2009; nor does it extend COBRA premium assistance. These provisions are addressed in other bills under consideration by Congress.
Contact us today to learn more about The Hiring Incentives to Restore Employment Act (HIRE Act) or for any tax related questions.