Congress has given a holiday present to small business owners.
This present has long-lasting value – Congress on Friday voted to make permanent more than 20 tax benefits and also extended many other important benefits through 2016 or 2019.
This package of tax benefits is known as tax extenders and we’ve been waiting all year for Congress to act on them. While it doesn’t leave much tax planning time for 2015, Friday’s vote will allow for tremendous tax planning opportunities in the future.
Among the tax benefits made permanent are the Research & Experimentation Tax Credit, which businesses can use to fund new product research, and Section 179 Depreciation, a tax benefit for purchasing new business equipment. Section 179’s $500,000 deduction limit also is now permanent.
Other tax benefits made permanent include:
- State and local sales tax deductions
- Special 15-year, straight-line cost recovery for qualified leasehold improvements, and qualified restaurant and retail improvement property
- An enhanced Earned Income Tax Credit
- An enhanced Child Tax Credit
- A modified classroom-expense deduction
- Parity for exclusion of employer-provided mass transit and parking benefits
- Tax-free distributions of up to $100,000 from IRAs for charitable purposes for those 70.5 years or older (among other incentives for charitable giving)
- An enhanced American Opportunity Tax Credit
Important tax benefits extended through 2019 include Bonus Depreciation – a very beneficial tax write-off for business equipment – and the Work Opportunity Tax Credit, including an enhancement for employers who hire long-term unemployed individuals to 40 percent of the first $6,000 of wages.
Other tax benefits extended through 2019 include the New Markets Tax Credit and certain look-through treatment between related controlled foreign corporations.
Most other tax provisions that were in the last tax extenders package and had expired retroactively after Dec. 31, 2014, are revived for two years, through 2016. Important provisions include:
- An extension and modification of the exclusion of mortgage debt discharge
- An extension of the above-the-line deduction for qualified tuition and related expenses
- Over a dozen incentives for energy production and conservation
So in short, the holidays have come early for small business owners (and accountants!). We look forward to investigating which of these many tax benefits can help your business grow in 2016 and in many years to come.
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