It’s that time of year again; the IRS is calling. Well not yet, but you do have to get started on doing your taxes this year. Fortunately, there are a few new credits for small businesses (and others) that can help to reduce your tax bill from capital investments to health care insurance credits.
Health care tax credits
Since the federal government wants to encourage small business owners to offer to pay at least half of their employee’s health care coverage, they offer a tax credit. Taken from the IRS website: “This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees.” The maximum credit available to eligible businesses is 35% of premiums paid this tax year and 25% of premiums paid for employees of tax-exempt organizations. To be eligible, businesses must have fewer than 25 full time employees that earn less than $50,000 per year.
Additionally, if you are self employed you can now deduct your health insurance premium payments from your business profits. This can save you money on your regular income tax and on your self employment taxes too. The IRS website has information that can tell you if you qualify as being ‘self employed’
Depreciation on the double
Section 179 has been extended, which means that you can speed up the process of depreciation for this year and next. You can now deduct the full purchase price of equipment instead of having to wait for the fullness of time. This gives you a greater tax break sooner than you would have without this extension.
The idea here is to encourage business owners to make capital purchases such as upgrading computer systems and other equipment. It is not intended for real estate or building purchases, or if your business spent more than $2 million. If you spend that much you are no longer considered a small business in the eyes of the IRS. Also it must be counted against profits that occurred this year and may not be carried forward or retroactive.
New car or truck deduction
New for this year the government is allowing you to depreciate a new car that is used for business purposes up to $11,060 ($11,160 for a light duty truck or van). This is fully $8,000 more that what was allowed in previous years.
What’s nice about this sped up depreciation schedule is that for qualified property or equipment (again see the IRS.gov for details of exactly what qualifies) you can make the claim even if your business did not turn a profit. It can even be claimed on top of the section 179 extension for those items that qualify. Your business can claim 50% of the cost of items purchased before September 8, 2010 and after that date until the end of 2011 this will increase to 100% which is an excellent way to increase your cash flow.
There are new business credits available that were previously disallowed under the Alternative Minimum Tax (AMT) before 2010. These include qualified hybrid motor vehicle tax credits, a credit for small business health insurance premiums and a credit for employer provided childcare facilities and services. Naturally there are new forms that need to be filled out and all are available on the IRS.gov website. If you are unsure on how to claim for these new credits it would be well worth your time to consult with a professional tax preparer so that you can make the most of your claims.