2016 Recap: Tax Provisions for Businesses
Whether you file as a corporation or sole proprietor, here’s what business owners need to know about tax changes for 2016.
Standard Mileage Rates
The standard mileage rates in 2016 are as follows: 54 cents per business mile driven, 19 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.
Health Care Tax Credit for Small Businesses
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $25,900 (adjusted annually for inflation) in 2016.
In 2016 (as in 2015 and 2014), the tax credit is worth up to 50 percent of your contribution toward employees’ health insurance premium costs (up to 35 percent for tax-exempt employers).
Section 179 Expensing and Depreciation
The enhanced Section 179 expense deduction was made permanent with a $500,000 limit by the Protecting Americans from Tax Hikes Act of 2015 (PATH). For equipment purchases, the maximum deduction is $500,000 provided no more than $2.01 million of qualifying equipment is placed in service during the current tax year. The deduction is phased out dollar-for-dollar if investments in qualifying property exceed the $2.01 million threshold, until it is eliminated, if $2.51 million or more of qualifying equipment is placed in service. The $500,000 and $2.01 million Section 179 limitations will be indexed for inflation.
The 50 percent bonus depreciation has been extended through 2019. Businesses are able to depreciate 50 percent of the cost of equipment acquired and placed in service during 2015, 2016 and 2017. However, the bonus depreciation is reduced to 40 percent in 2018 and 30 percent in 2019.
Please call us, if you have any questions about Section 179 expensing or bonus depreciation.
Work Opportunity Tax Credit (WOTC)
Extended through 2019, the Work Opportunity Tax Credit has been modified to include employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire. Higher wage limits apply to payments to certain veterans and long-term family assistance recipients. Please call us, if you have any questions about the Work Opportunity Tax Credit.
Please contact our office, if you need help understanding which deductions and tax credits can help you save money on taxes for your business.