Monday, November 11, 2013

Use ‘Em or Lose ‘Em: 5 Tax Breaks Set to Expire This Year

There are several federal tax breaks that are scheduled to end as of December 31st this year. Unless Congress decides to extend these breaks it is unsure whether any will apply next year. According to this article by the SBA there are five tax breaks that business owners should explore and take advantage of before they expire at year-end.

Break 1: Faster write-offs for buying needed equipment
Instead of depreciating your equipment costs overtime, here are two other ways you deduct these costs this year:

  • Deduct up to $500,000 of the cost of qualified equipment (whether new or pre-owned) this year as long as you’re profitable. Next year, the deduction limit is scheduled to be $25,000.
  • Deduct 50% of the cost of new qualified equipment, even if it adds to or creates a business loss. Next year, this deduction is set to disappear entirely.

Now you can deduct some of the cost of your equipment so you can upgrade your office computers, provide your staff with a smartphone or tablet, or add new machinery to your inventory.

Break 2: Faster write-offs for improving your facilities
Usually the costs for capital improvements to your workspace can only be depreciated over a 39 year period. However, improvements to leaseholds, (by the lessor, lessee, or subleasee), restaurants, and retail establishments can take advantage of any or all of the following write-offs for improvements that are completed before the end of the year:
  •   $250,000 first-year expensing for eligible improvements
  •    50% bonus depreciation for eligible improvements
  •  15-year amortization period for any costs not deducted with first-year expensing or bonus depreciation

Break 3: Tax credits for hiring certain workers
You should think about hiring certain target groups if you need new employees on your payroll. After projecting the cost of this hiring and factoring in future health care obligation you may find that you are entitled to tax credits that can be used to offset your tax bill. Here are some tax credits for hiring certain workers:

  •        Work opportunity credit for hiring certain disadvantaged workers, including certain veterans. Make sure that you timely submit IRS Form 8850 Download Adobe Reader to read this link content to your state work force agency to get eligible workers certified as entitling you to the credit.
  •           Indian employment credit if you hire an enrolled member, or spouse of an enrolled member, of an Indian tribe who performs services within an Indian reservation.
  •           Empowerment employment credit if your business is located within a federally-designated empowerment zone.

Break 4: Exclusion for gain on certain stock
Businesses that are C corporations involved in technology, manufacturing, retail or wholesale and is seeking new investors should consider issuing new stock before the end of the year. If your stock meets the definition of a qualified business stock and your investors hold it for more than five years, then all of their gain will be tax free. This is exclusion for gain on stock is said to decrease to 50% exclusion unless congress decides to extend the current 100% exclusion.

Break 5: Tax credit for doing research
If your business is thinking of doing research on a new product then you may be eligible for a tax credit of up to 20% of increased research expenses. This credit is not limited to research used to create products for sale. It also applies to research for internal processes (e.g., internal use software) that improve your business operations. Although this tax credit has been extended 14 times since its inception in 1981, it is set to expire at the end of this year and it is best to use the credit while you can.

To learn more about these tax breaks and to access more details visit the this link for the full article:

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