Published on April 9th, 2013 | by admin0
20 Small Business Tax Changes You Should Know
Doing taxes can be a lot of work, right? It is definitely not a fun chore. Still, you should pay attention: there may have been some tax changes you missed. Luckily you can now read them up, and be on your way to getting better tax refunds for your small business.
1. The Health Care Tax Credit
If you run a small business that cover up to half of your employees’ health insurance, you are qualified for a huge tax refund! To benefit significantly from this though, your small business should have a maximum of ten employees working full-time, and with an annual pay packet of at most $25,000. Does that sound like your business! Well, cheers!
2. You can enjoy Health Insurance deductions for the Self-employed
Previously, business owners could only deduct the cost of their insurance from their profits and not from their self-employment taxes.
Since you own your own small business and are your own boss, you can enjoy the benefit of deductions on your health insurance. This is a welcome change from the norm.
3. The Standard Mileage Rates have also changed
There are three mileage rates for vehicles. If you are using your car for business, the standard mileage rate has dropped (mercifully) from 55 cents per mile to 50 cents. Vehicles used for medical or moving purposes have their rates dropped from 24 cents per mile to 16.5 cents. Vehicles used for charitable purposes still have a constant tax rate of 14 cents per mile.
4. Bonus Extensions on Depreciation
Small business owners can now depreciate items that they have even if they are running their business on a deficit for the year. The idea is for small businesses to have a little more cash on their hands. However, it should be noted that bonus depreciation only applies to newly acquired equipment for the small business.
5. Get Depreciation on Your Business’ Vehicle
Now, small business owners who purchase brand new cars or trucks for their businesses will get even better depreciation than they usually get, and this includes a $8000 bonus depreciation, apart from the normal depreciation that comes in the first year.
6. Tax Breaks on General Business Credit
Businesses that may have been affected in the past by the AMT (Alternative Minimum tax) can now heave a sigh of relief. This actually began in 2010, and now small business owners under the AMT can now enjoy deductions that were exclusive to the General Business Credit Users.
7. There’s Potential in the COBRA Premium Assistance Credit
Businesses can now take credit for certain of their employment taxes, all thanks to the American Recovery and Reinvestment Act, which was passed in 2009. These businesses that provide COBRA assistance to eligible people enjoy the attendant credit.
8. Rewards for Domestic Production
Businesses can now experience up to 9% deductions for their home-based business activities. However, it is worthy to note that this does not apply to all businesses. You should check to see if your business is qualified for these deductions first.
9. Tanning Services are now taxed
Indoor tanning services and companies are now required to pay a ten percent excise tax. This simply means that you’ll start to pay more for tanning.
10. Work Opportunity Credit has been Expanded
If your small business can employ target people (who face barriers to employment), your small business becomes eligible for tax credit.
11. The Section 179 Addition to the IRS Code:
The IRS code has a new section: section 179 that allows business get deductions on certain properties, instead of the usual process of depreciating the property. Businesses should check out which of their property is eligible for the section 179 expense deduction.
12. The deductions on start-up expenses for Businesses have also increased
Businesses now have an improved limit on their deductions. Businesses which are just starting up or beginning their trade now have a start-up deduction limit of $10,000 as opposed to the former $5,000 deduction.
13. The Income Tax Bracket May Shift
It has been predicted that the income tax bracketfor every American will shift, with the smallest brackets moving from ten percent to fifteen percent, and the largest shifting from thirty five percent to 39.6 percent. This means that businesses (and ordinary people) may have to pay more taxes in 2013.
14. Investments will be taxed
If Congress doesn’t interfere with the current tax situation, it is believed that the max rate on capital gains would increase to twenty percent. Furthermore, dividends are projected to be taxed at the same amount as the regular income.
15. The Education Saving Plan will be Adjusted
The CoverDell Education Savings Accounts’ contribution limit will be adjusted from $2000 to $4000. Also, kindergartens through to 12th graders are no longer eligible for qualified withdrawals.
16. Estate taxes will also be changed
If things continue along the path they are currently on, the maximum estate tax rate is expected to jump from 35% to 55%, while a $1 million tax exemption will expose even more businesses to the tax rate.
17. Payroll Tax May Be Altered
This one works in two ways. First, workers’ share of their social security taxes would increase from the former 4.2% to 6.2%. On the other hand, the FICA part of the tax on self-employed people would increase from 10.4% to 12.4%
18. Tax on Child Care
It is probably important for your business to note that the child care credit would change from the $1000 point we know it to be to $500 per child, and it only applies to those who were eligible for child care tax credit in the first place.
19. The Tax Break Scare
There is still the speculation that the ‘freebies’, the tax breaks which businesses are used to getting (local sales tax, supplies credit, state tax credits etc) would stop later in 2013. It is good to be prepared.
20. The Rich and Poor May Soon be paying the same Taxes
The alternative minimum tax (AMT) which was meant to ensure that the rich do not pay ridiculously low taxes may soon begin to affect LLCs and partnerships. This is due to the recent Fiscal Cliff issue.
It is good to be braced up for these changes. Being an entrepreneur in the world today s requires getting information on time. The small businesses that will make it far are the ones that take advantage of opportunities and prepare for obstacles even before they appear!