On March 18, 2010, President Obama signed H.R. 2847, the Hiring Incentives to Restore Employment (HIRE) Act. The Act contains a number of tax provisions intended to promote hiring and encourage business investments.
Payroll Tax Exemption
The Act exempts employers from the employer portion of Social Security employment taxes (6.2% of the first $106,800 of wages) for 2010 for employees hired after February 3, 2010 and before January 1, 2011. The exemption is allowed only if the new employee meets the following conditions:
- The employee was previously unemployed (had not worked more than 40 hours during the 60-day period ending on the date that employment begins.
- The employee does not replace another employee of the employer, unless the replaced employee left employment voluntarily or for cause.
Note: The exemption does not apply to Federal and State agencies. State colleges and universities are eligible for the exemption.
To encourage employers to retain these new employees, the Act provides businesses with a tax credit with respect to each retained employee. The credit is the lesser of $1,000 or 6.2% of the wages paid to the retained employee during the 52-consecutive week period.
Section 179 Expense
The Act extends the $250,000 Section 179 expense level (and the $800,000 phase-out limitation) that expired on December 31, 2009. The $250,000 Section 179 expense level will now be allowed through December 31, 2010.
