Key Tax Provisions of the Hiring Incentives to Restore Employment (HIRE) Act of 2010

March 21, 2010

On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act of 2010, creating tax incentives for businesses to hire new workers and extending higher capital investment expensing limits for small businesses. Among the Act's key provisions are the following:

Hiring Incentives:

• The Act provides payroll tax relief to private-sector employers that hire workers who have been unemployed for at least 60 days. This exemption applies to workers hired after February 3, 2010, but before January 1, 2011. Under this provision, employers will not be subject to the usual employer's 6.2% share of OASDI taxes on wages paid to these workers between March 19, 2010 and December 31, 2010. An employer could potentially save up to $6,621 if it hired an unemployed worker and paid that worker at least $106,800—the maximum amount of wages subject to Social Security taxes—by the end of the year.
• The Act also provides an income tax credit to certain employers of 6.2% of wages paid, up to $1,000, for each new employee retained for 52 consecutive weeks.

Continuation of Increased Expensing Limitations:

• The Act extends higher Section 179 limitations for small businesses through 2010, allowing them generally to expense up to $250,000 of qualifying business property, such as machinery and equipment, that is placed in service in 2010. This extension will allow small businesses to deduct currently against their gross income up to $250,000, rather than recovering that amount over time through depreciation deductions. This higher expensing limitation begins to phase out when property placed in service during the tax year exceeds $800,000.

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This alert is provided as general information, and is not a substitute for legal or other professional advice.