By Mark Jaeger, director of development of the tax, TaxAct
in December 2015, Congress gave the business owners a nice year-end gift by approving a bill that extends many tax breaks expired or expiring for business owners. Americans Protection Hiking tax (PATH) Act includes several provisions that can reduce your business taxes
The main provisions of the business tax in the PATH Act :.
Enhanced section 179 deduction
With this deduction permanent now, business owners can deduct up to $ 500,000 in the year considered a new or used is put into service. Phases amount of deduction to $ 2 million, after which the amount of the deduction is dollar for dollar. (The deduction would be reduced to $ 25,000 without PATH.)
Eligible expenses include machinery, equipment, software available to the public and real property. (Note :. Although the rental property are not eligible, homeowners can qualify for the next topic, bonus depreciation)
If you include only part of the cost of eligible property deduction of section 179, you can usually depreciate the costs that you do not deduct (see bonus depreciation).
Bonus depreciation
This broad provision allows companies to keep 50 percent deduction of certain long goods production covering new assets (including leasing property) in the year of taxation, it was commissioned. Bonus depreciation will remain 50 percent until 2017, and then fall to 40 percent in 2018 and 30 percent in 2019.
Tip :. If your property is eligible, your tax benefit may be greater with the strengthening of Section 179 deduction above
S integrated company earnings period
If your S corporation has already been structured as a C corporation, the period that you have to hold assets after conversion to avoid tax on gains built was reduced to five years (previously 10 years).
research and development credit
from 14 to 20 percent, now it revolving credit allows companies to perform certain types of research. From 2016, companies can use the credit to offset their minimum tax (AMT) liability and replacement Startups can use it to offset taxes on the payroll.
Empowerment employment credit area
If you qualified employee empowerment employees in the area during 2015, you can claim this credit for 20 percent of eligible salaries, up competition $ 15,000 per employee. This appropriation is now permanent.
Partnerships and S corporations must file Form 8844, Credit Empowerment Zone Employment. Otherwise, report the credit on Form 3800, General Business Credit.
Exclusion of the gain on qualified small business stock
This exclusion should be reduced to 50 percent from 2015, but the PATH Act excluding 100 percent on gains from the sale of small business stock held for at least five years standing.
Work Opportunity Tax Credit (WOTC)
taxable companies that hire workers targeted economic groups, as well as tax-exempt employers that hire military veterans can claim the credit until in 2019. the maximum credit is $ 9,0 per qualified veteran and $ 6,240 for tax-exempt organizations, the amount depending on the circumstances of each veteran.
The amount of WOTC is calculated on Form 5884 for taxable companies and reported on Form 3800, General Business Credit. tax-exempt organizations claim the 5884-C form, Credit Opportunity work for exempt organizations tax-qualified hiring qualified veterans, as a credit against the employer portion of the security tax social.
new markets credit
The PATH Act authorized $ 3.5 billion in new retroactive credit markets in 2015 and 2019. The credit is available to individuals and businesses who are qualified investments of shares (Qays) in qualified community development entities (CDES), designed to create jobs and materially improve the lives of residents of low-income communities.
The credit is equal to 39 percent of the QEI and is claimed over seven years, with five percent for the first three credit allocation dates and six per cent for the last four dates of credit the allocation.
Indian employment credit
companies with employees who live on or near an Indian reservation may be eligible for this credit is claimed on IRS Form 8845, the employment credit India, for 2015 and 2016.
the maximum credit is 20 percent of the excess of the current pensionable salary and employee health insurance costs on amounts paid or incurred during 1993 . Your credit is reduced by any amount of credit claimed for the Work Opportunity employee.
Remember, TaxAct business editions will navigate these tax law changes for you while helping you maximize your deductions. Just answer simple questions about your business expenses and income. Start now!
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