Friday, February 8, 2013
BILL
BISCHOFF for the Wall St. Journal writes:Last month’s fiscal-cliff legislation included lots of tax
provisions. Media attention has focused heavily on changes that affect
individuals. But the new law also provides some valuable tax-saving breaks for
businesses. Here’s the most important stuff to know for your outfit’s 2013 tax
year.
The $500,000 and $250,000 allowances are reduced if your business
places in service over $2 million worth of assets that would otherwise qualify
for Section 179 deductions. This phase-out rule usually only affects larger
businesses.
Warning: Unlike 50% bonus depreciation
deductions (explained below), Section 179 deductions cannot exceed the
taxpayer’s business taxable income calculated before the Section 179
deductions. In other words, Section 179 deductions cannot create or increase an
overall business tax loss for the year. Special rules apply to unincorporated
businesses (sole proprietorships, partnerships, and LLCs) and S corporations.
Consult your tax pro for details about how the Section 179 deduction rules work
and whether your business can benefit.
50% First-Year Bonus Depreciation for New Assets
The new law extended 50% first-year bonus depreciation for an
additional year to cover qualifying new (not used) business assets that are
placed in service during calendar year 2013. The 50% bonus-depreciation
write-off is on top of the first-year depreciation deduction allowed under the
“regular” rules. Therefore your business can deduct over half the cost of
qualifying new assets in Year 1 instead of writing them off over a number of
years.
For many small businesses, the single most important element of
the 50% bonus depreciation deal is the $8,000 increase in the maximum allowable
first-year depreciation deduction for cars, light trucks, and light vans.
* For new cars, the maximum first-year depreciation deduction for
2013 will be about $11,300 (the IRS has yet to announce the exact figure).
Without the new law, the maximum deduction would have been $8,000 less. To
claim the maximum deduction, you must use the car 100% for business. The
deduction is proportionately reduced if you use it over 50% for business but
less than 100%.
* For new light trucks and light vans, the maximum first-year
deduction for 2013 will be about $11,500. Without the new law, the maximum
deduction would have been $8,000 less. To claim the maximum deduction, you must
use the vehicle 100% for business. The deduction is proportionately reduced if
you use it over 50% for business but less than 100%.
Key point: Unlike Section 179
deductions, your business can claim 50% bonus depreciation deductions even if
it has little or no taxable income for the year. Therefore, bonus depreciation
deductions can create or increase a so-called net operating loss (NOL) for the
year. If your business has an NOL for the 2013 tax year, you can carry the NOL
back to 2012 and/or 2011 and recover some or all of the income taxes paid for
those years.
Special First-Year Depreciation Rules for “Heavy” Vehicles
If you buy a business vehicle with a gross vehicle weight rating
(GVWR) above 6,000 pounds, it’s generally treated as a truck (as opposed to a
passenger vehicle) for tax purposes. Truck treatment is much more favorable,
because the maximum first-year depreciation deductions for cars, light trucks,
and vans will only be a little over $11,000 this year (as explained earlier).
100% Gain Exclusion for Qualified Small Business Corporation Stock
The fiscal cliff legislation extended the temporary 100% federal
income tax exclusion for gains from sales of qualified small business
corporation (QSBC) stock issued in 2013. However, don’t get too excited just
yet. QSBC shares must be held for more than five years to be eligible for the
gain exclusion privilege, so we are talking about gains from stock sales that
occur years from now. That said, the 100% gain exclusion is obviously a great
deal if you qualify. If you’re thinking about injecting new capital into your
business this year, consult your tax adviser to see if you can position yourself
to take advantage of this tax-saving opportunity.
Tax-Free Transit and Parking Deals for Employees
For 2013, your company can provide employees with up to $245 per
month in tax-free transit passes. In addition, you can give employees up to
$245 per month tax-free for parking. The advantage of such a program for your
employees is obvious. The advantage for your company is these amounts are
exempt from federal employment taxes (unlike wage payments).
If you don’t want the company to pay for these fringes, you can
offer employees a salary reduction arrangement instead. Under this alternative,
each employee could set aside up to $245 per month for transit passes and up to
$245 per month for parking. These amounts are subtracted from the employee’s
taxable salary. On the employee side of the deal, this arrangement allows for
most or all commuting costs to be covered with before-tax dollars. On the
company’s side of the deal, you don’t have to pay federal employment taxes on
the salary reduction amounts. It’s a win-win proposition.
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