“The only constant is change,” said Heraclitus, a Greek Philosopher. That philosophy is clearly evident in the evolving Internal Revenue Code, especially as it relates to small businesses.
While owners of small businesses faced higher tax rates in 2013, most small business owners are not aware that many of the more popular small business deductions have expired for 2014.
To begin, Congress has not renewed the “extenders,” which includes nearly 50 provisions in the tax-code that permit write-offs of various types of business expenditures. The good news is that all or most of the “extenders” may be reinstated by Congress. As of this post, however, a vote on these “extenders” is not on the books.
Because of this, it will be difficult for small business owners to make informed decisions about the tax implications of spending for capital equipment, research and development, and even for new hires on their payroll. As another unfortunate result, U.S. businesses, large and small, must plan 2014 spending without the Work Opportunity Tax Credit, the research credit, and other important tax necessities.
As an example, the $500,000 ceiling on the Section 179 expense deduction had allowed businesses to deduct capital costs in the year they were incurred instead of depreciating the costs over several years. The maximum ceiling is now $25,000 for 2014.
Other tax code changes ahead for small businesses in 2014 include the expiration of bonus depreciation. Bonus depreciation allowed businesses to write off, at an accelerated rate, the cost of property beyond the amount that could be deducted using the Section 179 expense deduction. This expiration includes the clause in the bonus depreciation rules that had previously allowed an additional $8,000 to be deducted on the purchase of a new vehicle.
Some good tax news does exist for small businesses. The Credit for Small Employer Health Insurance Premiums remains available to those that have 25 or fewer full-time equivalent employees, pay average annual wages of $50,000 or less and uniformly pay at least half of their health insurance premiums. For 2014, the maximum credit percentage has risen from 35 percent to 50 percent of premiums paid.
As tax changes are inevitable, small businesses need to plan ahead for 2014. Be sure to check with your tax advisor to maximize the small business deductions for 2014.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]
---
The information contained in the Knowledge Center is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. In no event will CST or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Knowledge Center or for any consequential, special or similar damages, even if advised of the possibility of such damages.