Many of us are working to complete projects, close sales, and wrap up our books for 2015, and thinking about 2016. Lucky for us, congress left us a treat under the Christmas tree this year: after years of leaving business owners without a clear outlook on tax exclusions and deductions they’re allowed to utilize, legislators have codified more permanent tax extender legislation.
Now is the time to review your current business tax strategy to understand where you’ve been, what you can do to finish 2015 strong, and begin the new year with defined guidelines around deductions, exclusions, and a more permanent tax structure.
Let’s take a look at what is in store for us in the future:
Research & Development Tax Credit
Beginning in 2016, this credit is made permanent. Qualified small businesses with no income tax liability will have the chance to offset payroll taxes with this credit.
Section 179 Deduction
In 2016, the deduction level was set to go from $500,000 down to $25,000 for immediate expensing of qualified assets. Now, the Section 179 deduction is permanently raised to the higher $500,000 limit and indexed for inflation in future years.
Section 168(k) Bonus Depreciation
Once you hit the immediate expensing cap under Section 179, you are now entitled to 50% additional expensing bonus on specified property through 2019.
W-2s, W-3s, and returns or statements reporting non-employee compensation may be required to file earlier than in the past (by January 31st). Ask your tax advisor if this new deadline affects you.
Section 1202 Stock
100% exclusion allowing taxpayers (i.e. investors and founders) who sell qualifying small business stock held longer than 5 years to exclude at least 50% the gain on sale is now made permanent. Make sure you talk to your tax advisor before selling company stock to see if you are eligible for this benefit.
If you are excited as I am, you can read the full text of these updates at http://docs.house.gov/billsthisweek/20151214/121515.250_xml.pdf
If you aren’t quite sure where to start in preparing for tax season, check out InDinero’s Entrepreneur’s End-of-Year Tax Pack at http://info.indinero.com/business-taxes-tax-pack for insightful tips. InDinero put together this excellent guide and workbook for entrepreneurs and their operational managers to prepare for a 2015 annual tax review. Armed with this guide, entrepreneurs will be able to fully understand potential tax liabilities and the main components within a business tax return.