What Was the Job Creation Act of 2010?

The Small Business Jobs Act of 2010 was enacted following the financial crisis of 2008, a period of high unemployment and stagnant business growth. The primary objective of this legislation was to encourage small businesses to invest in their operations and hire new workers. The law was a targeted economic stimulus package that created a series of tax incentives and financial programs. These benefits were intended to reduce the costs of business investment and workforce expansion, thereby boosting business confidence and accelerating economic recovery.

Tax Incentives for Business Investment

A feature of the 2010 legislation was the enhancement of depreciation-related tax deductions. One provision was the temporary introduction of 100% bonus depreciation, which allowed a business to deduct the full cost of new equipment in the year it was placed in service. This provision was later revived but is now being phased out; for property placed in service in 2025, the bonus depreciation rate is 40%.

The types of assets eligible for this immediate expensing were broad, covering most tangible personal property with a recovery period of 20 years or less, such as machinery, equipment, and furniture, as well as certain computer software. For a small business, a $100,000 investment in new equipment could generate a large tax deduction in the same year, lowering its taxable income and freeing up cash flow.

The Act also temporarily increased benefits under Section 179 of the Internal Revenue Code, which allows businesses to expense the cost of qualifying property. For 2010 and 2011, the law raised the maximum amount a business could expense to $500,000 and increased the investment phase-out threshold to $2 million. Since then, these limits have been made permanent and increased; for the 2025 tax year, the maximum Section 179 deduction is $1,250,000, with the deduction phasing out for businesses that purchase more than $3,130,000 in equipment.

Another component of the Act was a temporary increase in the deduction for business start-up expenditures, such as market research or legal fees. The Act allowed taxpayers to deduct up to $10,000 of these costs in 2010. This limit has since reverted to $5,000, which is reduced dollar-for-dollar by the amount start-up costs exceed $50,000.

Tax Incentives for Hiring Employees

To address the high unemployment rate, the Act introduced a temporary payroll tax exemption for employers to hire individuals who had been out of work. The law exempted private-sector employers from paying their 6.2% share of the Social Security tax on wages paid to qualifying new hires through the end of 2010.

A “qualified employee” was defined as someone who began employment with the employer after February 3, 2010, and before January 1, 2011. The individual also had to certify that they had not been employed for more than 40 hours during the 60-day period before their start date. This requirement ensured the incentive was targeted toward getting the long-term unemployed back into the workforce.

The Act also included an incentive to encourage employee retention. For each qualified employee who remained on the payroll for at least 52 consecutive weeks, the employer could claim a one-time general business tax credit of up to $1,000. This two-part structure provided an immediate benefit for hiring and a later reward for creating stable employment opportunities.

Additional Business and Reporting Provisions

The Act improved access to capital for small businesses by enhancing programs administered by the Small Business Administration (SBA). It increased the maximum loan amount for the 7(a) loan program to $5 million, a limit that remains in place. For the 504 loan program, the maximum is generally $5 million, though it can be as high as $5.5 million for certain manufacturing or energy-related projects. The SBA’s guarantee on certain loans was also temporarily increased, reducing risk for private lenders.

The Act also addressed the tax treatment of employer-provided cell phones. Previously, cell phones were often classified as “listed property,” which subjected them to stricter substantiation requirements to prove business use. The Act removed employer-provided cell phones from this category, simplifying tax compliance so the value of the business use of a company cell phone was excludable from an employee’s income without burdensome record-keeping.

Finally, the legislation introduced a new information reporting requirement for individuals receiving rental income. The provision mandated that taxpayers receiving rental income from real property were required to issue a Form 1099-MISC to any service provider to whom they paid $600 or more for rental property expenses. This requirement was later repealed in 2011 before it went into effect.