As a
small business owner, you probably already know all too well that tax laws can
be confusing and are ever-changing. To help make things easier on you, we’ve
provided a comprehensive listing and explanation of some of the most important
tax deduction changes affecting small business owners this year. However, do
keep in mind that, as a business owner, you need to be working with a corporate accountant who understands your business, its needs, and its unique
structure, and who can help you to make the most of your deductions.
Change
#1: Section 179
Section
179 of the United States tax code is a wonderful thing for small business
owners. For years, it has allowed them to deduct the complete and total price
of certain equipment or software purchased or financed to assist in their
business dealings.
However,
the tax law is changing this year, and the new law states that busi
nesses can
only deduct up to a certain amount of the cost of such equipment or software as
a business expense. While the limit used to be a hefty $500,000, it is now only
$25,000.
That’s
quite a large drop, so be aware of this change and work with your accountant to
make sure you’re within the limits on your equipment or software purchases. If
you’re not, your accountant may know some legal workarounds that can still help
you to deduct and save within the bounds of federal tax law.
Change
#2: Research and Development Tax Credit
An
important part of any business’s growth and success is its willingness and
ability to conduct comprehensive research and apply that research to growing
itself and potentially expanding. The government understands this and, because
it wants small businesses to succeed and therefore benefit the economy as much
as possible, it has henceforth offered a research and development credit that
allows these businesses to deduct any relevant costs.
Unfortunately,
though, the IRS has found that many people were misusing and abusing this
credit and has thus discontinued it. This is very sad news for many small
business owners, but with the right accountant and advisor, you can find other
deduction and credit options to help cover part or even some of your research
and development costs.
Change
#3: S Corporation Provisions
They
say bad things come in threes, and unfortunately, this third one on the list
relates to companies that have been designated as “S Corporations.” If your
business falls under this heading, you’ll find that, this year, you’re no
longer allowed to deduct certain charitable contributions, including
contributions of appreciated property, built-in gains, and food.