28 Oct Small Business Tax Credits That May Expire
The United States Small Business Administration has a post regarding five small business tax credits that may expire at the end of this year. The two that I like most:
Break 1: Faster write-offs for buying needed equipment
Need to upgrade your computers? Provide staff with tablets and smartphones? Add new machinery? You have two better ways to deduct your costs this year than merely depreciating the costs over a number of years:
- Deduct up to $500,000 of the cost of qualified equipment (whether new or pre-owned) this year as long as you’re profitable. Next year, the deduction limit is scheduled to be $25,000.
- Deduct 50% of the cost of new qualified equipment, even if it adds to or creates a business loss. Next year, this deduction is set to disappear entirely.
Note: You can use either break even if you finance your purchase in whole or in part.
This credit may be crucial. In the world of faster communications and, let’s face it, the need to do the same amount of work with fewer people, taking advantage of this credit may go a long way to helping small businesses. I am thinking of getting a new tablet for my firm and this credit will come in handy.
I also suggest this credit, particularly for start-ups and tech related businesses.
Break 5: Tax credit for doing research
If your company does research to create a new product, you may be eligible for a tax credit of up to 20% of increased research expenses. This credit is set to expire at the end of this year unless Congress extends it. While an extension is probable—the research credit has been extended 14 times since its inception in 1981—it’s still smart to use the credit while you can.
The credit is not limited to research to create products for sale. It also applies to research for internal processes (e.g., internal use software) that improve your business operations. For more details see the instructions to IRS Form 6765.
As with all tax matters, be sure to consult your accountant or tax lawyer for assistance to see if you qualify.