As women and small business owners, we’re used to taking on the responsibility of many roles at once: Boss, mom, promoter, consultant, private chef—the list goes on and on. Wearing so many different hats can make it hard to remember when it’s time to get your business taxes in line and ready, especially when the tax laws change from year to year. That’s why we’re sharing the newest changes in tax laws and how they will affect your business, along with some tips on how to really make the most of them. Don’t let tax season be taxing on you!
What’s New: Bonus Depreciation
This expensing provision allows businesses to claim additional depreciation for certain types of equipment in the first year of the recovery period. What this means is that if you purchase or lease new hardware or software for your business, for example, you’ll be able to depreciate 50% of the cost. Small businesses can now deduct these costs up front versus depreciating the cost of equipment (say, getting a small amount back over five years), including: Computers, vehicles, manufacturing machines and furniture, as well as some types of property. What’s more, the Section 179 deduction will be up $10,000 from last year, giving you a bigger tax break on new equipment.
How This Will Help You
There truly may be no better time than the present to invest in the most recent, up to date equipment, hardware and software for your business thanks to this provision. In fact, the sooner you move, the higher the bonus depreciation! For property placed in service in 2015, 2016 and 2017, the bonus depreciation is 50%, where as in 2018, it drops to 40% and finally 30% in 2019. So if you were thinking of replacing a particularly cranky piece of machinery, or your technology is falling behind, now is the time to invest in these updates.
Standalone HRAs Are Back
Through the 21st Century Cures Act, which was passed by Congress in December 2016, qualified small business owners can now once again use health reimbursement arrangements (HRAs) to help fund employees who purchase individual health plans on the open market.
How This Will Help You
Small business owners aren’t required to offer health care insurance, but many of them want to help their employees pay for coverage. This will allow them to aid in the cost without taking too much financial responsibility. After all, what’s a business without its people?
Expanded Eligibility for R&D Tax Credit
Thanks to the PATH Act, internal use software and development is now eligible for research and development tax credit. This is especially important for businesses in software, manufacturing, software, wine, aerospace, biotech, construction (and more!) that can now qualify for this credit if they have scientists or product development team members on staff.
How This Will Help You
If you’ve been considering making the leap to include more scientists, researchers and engineers on your team, for research or entirely new products, this is the time! Until the PATH Act, much of the software wasn’t eligible for this R&D tax credit, but in a technologically advanced age, research, development and innovation are more important than ever to staying ahead of competitors.