Fuel Smarts

Small Business Bill Would Raise Insurance and Meal Deductions

January 31, 2001

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A bill in the U.S. Senate would allow self-employed individuals to deduct 100% of health insurance costs starting in 2001 and would increase the business meal deduction to 80% for small businesses.

The Small Business Works Act of 2001, introduced by Senator Christopher “Kit” Bond (R-Mo.), is a small business tax relief and simplification package intended to complement broader tax measures proposed by President Bush.
Currently, self-employed persons can only deduct 60 percent of health insurance costs for themselves and their families. The deduction is scheduled to increase over the next few years, reaching 100 percent in 2003, but this bill would move that to 2001.
While most business travelers are only allowed to deduct 50 percent of meal expenses, workers subject to federal hours-of-service rules currently can deduct 60 percent for 2000 and 2001 and, through gradual increases, will be allowed to deduct 80 percent by 2008. This legislation, if passed, would allow small business owners to deduct 80 percent starting this year.
The bill would also modify depreciation rules, permitting a two-year write-off for computers and software instead of five years for computers and three years for software commonly used now. The amount of equipment purchases a small business could expense each year would increase from the current $24,000 to $50,000.
Other provisions of the bill include repeal of the Alternative Minimum Tax for individuals, repeal of a 0.2% surtax added to the Federal Unemployment Tax in 1976, and simplification of the estimated tax rules to apply a consistent test: estimated taxes equal to 90% of the current year’s taxes or 100% of the prior year's taxes would avoid underpayment penalty.

To voice your opinions on this bill to your senator, visit www.senate.gov.

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