Tax Savings for Your Business

Written by Peter Tran

June 19, 2017

Changes made to tax business rules for 2010 were numerous.  So numerous, in fact, that many tax-saving opportunities may be overlooked by when preparing their 2010 business returns.  Today, I’ll review four changes may help uce your business’s 2010 taxable income and your tax liability.

Small Employer Insurance Cit:  This cit was included in the Patient and Affordability Act passed in March, 2010 and will reimburse many employers for up to 3% (2% for nonprofits) of the insurance premiums paid for their employees.

To qualify, businesses and tax-exempt organizations must meet three criteria: Pay at least 0 percent of their employees’ single-rate care premiums, employ less than 2 “full-time equivalent (FTE’s)” employees, and pay these FTEs an average of less than $0,000 per year.  Salaries, wages, and insurance premiums of owners and their relatives are used when calculating the cit.

Businesses that employee 10 FTEs or less who earn an average of $2,000 or less will qualify for the full cit of 3% of employer-paid premiums.  The available cit is then uced for employers with more than 10 FTEs or whose average wage exceeds $2,000.  The cit reaches zero when either the number of FTE’s equal 2 or average FTE wage reach $0,000.
The rules governing the Small Employer Insurance Cit are complex and the calculations necessary to determine the cit involve a cumbersome, multistep process.  The payoff for businesses that qualify, however, can be substantial – making the effort a worthwhile, tax-saving endeavor.

One Year Insurance Deduction from Self Employt 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 employt”) tax on premiums paid to cover themselves and their families.  The Small Business Jobs Act of 2010 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 2010 self-employt tax.

If you qualify for the insurance deduction on line 29 of form 1040 and are subject to self-employt tax, make sure your insurance premiums are deducted on line 3 of schedule SE. 
Bonus Depreciation Increased to a Full 100%: A major change in the Tax Hike Prevention Act allows businesses to deduct the full cost of certain property placed in service from September 8, 2010 to December 31, 2011.  For property placed in service between January 1 and September 7, 2010, Bonus Depreciation is 0% 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 equipt used in business – although may be subject to special limits.

Section 179 Expense Limit Extended:  Section 179 of the US Tax Code allows businesses to expense certain property rather than depreciate it over a number of years.  The tax rules for 2010 allowed businesses to utilize the “179 election” and expense up to $00,000 of property placed in service during the year.  The Tax Hike uction Act of 2010 extends this $00,000 limit through 2011.

Property that qualifies for the 179 Expense includes most “non-rental” personal property used at least 0% in a trade or business.  The full $00,000 deduction is available to businesses that place less than $2,000,000 of qualifying property in service during each tax year.  The allowable deduction is uced dollar for dollar if the total value of qualifying property placed in service exceeds $2,000,000 during the year.

This article outlines some tax changes to keep in mind as you prepare your 2010 business return and begin planning for 2011.  The rules governing these deductions and cits are more complex than this summary may suggest and several have been discussed in previous articles (available at hbsbusiness.com).  If you should have any questions regarding your business or personal income tax returns, please feel free to contact our office to speak with a tax professional.

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