Tax Savings for Your Business

Changes made to tax rules for 200 were numerous.  So numerous, in fact, that many tax-saving opportunities may be overlooked by owners when preparing their 200 returns.  Today, I’ll four changes may help reduce your ’s 200 taxable income and your tax liability.

Small Employer Insurance Credit:  This credit was included in the Patient Protection and Affordability Act passed in March, 200 and will reimburse many employers for up to 35% (25% for nonprofits) of the insurance premiums paid for their employees.

To qualify, es and tax-exempt organizations must meet three criteria: Pay at least 50 percent of their employees’ single-rate care premiums, employ less than 25 “full-time equivalent (FTE’s)” employees, and pay these FTEs an average of less than $50,000 per year.  Salaries, wages, and insurance premiums of owners and their relatives are not used when calculating the credit.

es that employee 0 FTEs or less who earn an average of $25,000 or less will qualify for the full credit of 35% of employer-paid premiums.  The available credit is then reduced for employers with more than 0 FTEs or whose average wage exceeds $25,000.  The credit reaches zero when either the number of FTE’s equal 25 or average FTE wage reach $50,000.
The rules governing the Small Employer Insurance Credit are complex and the calculations necessary to determine the credit involve a cumbersome, multistep process.  The payoff for es that qualify, however, can be substantial – making the effort a worthwhile, tax-saving endeavor.

One Year Insurance Deduction from Self Employment Tax:  A -standing inequity in the tax code allows employees to receive insurance completely free from income and FICA taxes.  The employers who pay for this benefit, however, must pay FICA (“self employment”) tax on premiums paid to cover themselves and their families.  The Small Jobs Act of 200 made a one year fix to this inequity by allowing self-employed taxpayers to deduct insurance premiums paid for themselves and families when calculating their 200 self-employment tax.

If you qualify for the insurance deduction on line 29 of f 040 and are subject to self-employment tax, make sure your insurance premiums are deducted on line 3 of schedule SE. 
Bonus Depreciation Increased to a Full 00%: A major change in the Tax Hike Prevention Act allows es to deduct the full cost of certain property placed in seice from September 8, 200 to December 3, 20.  For property placed in seice between January and September 7, 200, Bonus Depreciation is 50% of its total cost.

Property that qualifies for bonus depreciation includes “original use” (meaning “new”) property having a depreciable recovery period of 20 years or less.  This includes most property and equipment used in – although vehicles may be subject to special limits.

Section 79 Expense Limit Extended:  Section 79 of the US Tax Code allows es to expense certain property rather than depreciate it over a number of years.  The tax rules for 200 allowed es to utilize the “79 election” and expense up to $500,000 of property placed in seice during the year.  The Tax Hike Reduction Act of 200 extends this $500,000 limit through 20.

Property that qualifies for the 79 Expense includes most “non-rental” personal property used at least 50% in a trade or .  The full $500,000 deduction is available to es that place less than $2,000,000 of qualifying property in seice during each tax year.  The allowable deduction is reduced dollar for dollar if the total value of qualifying property placed in seice exceeds $2,000,000 during the year.

This article outlines some tax changes to keep in mind as you prepare your 200 return and begin for 20.  The rules governing these deductions and credits are more complex than this summary may suggest and several have been discussed in previous articles (available at hbs.com).  If you should have any regarding your or personal income tax returns, please free to contact our office to speak with a tax professional.

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