Own a Business? 6 New Tax Breaks

If you own a small business, you know how expensive it can be. Looking for more ways to save? You must check out this article from CNN.com explaining six important new tax breaks. I've included a snippet of the article below.

Health care tax credit:

Small businesses that pay at least half of their employee's health coverage can get a significant tax refund.

The maximum credit goes to businesses with 10 or fewer full-time employees with annual wages that average $25,000 or less. The break phases out for firms with 25 employees or that pay average wages above $50,000.

For 2010 through 2013, the tax credit covers up to 35% of the money that a qualifying business spends on its health insurance premiums. In 2014, the top tax credit bumps up to 50%. Tax-exempt organizations can claim 25% in the first time period and 35% after that. The credit is available for a maximum of six years: 2010 through 2013 and for any two years after that.

Health insurance deduction for self employed:

Are you your own boss and paying for your own health insurance?

Normally, you can deduct your insurance costs from your business profits, but you can't deduct those costs from your self-employment taxes. But in 2010, the self-employed can deduct their health insurance costs from their business profits for both taxes. Let's say Sally, an architect, makes $50,000 in net income and pays $6,000 for health insurance.

Read more at CNN.com...

More Tax Cuts

President Obama will propose a new bevy of tax cuts to help small business owners. Before he announces the actual cuts, rumors are swirling. According to a report from NPR today, we can expect to see two specific proposals:

1. Businesses would be allowed to write off 100% of new capital investments through 2011. Companies are already allowed to deduct these expenses, but the deduction is taken over a span of several years. This would be an upfront, immediate gratification business deduction. White House Economists estimate this could reduce business taxes by approximately $200 billion over two years.



2. Permanently instate the tax credits for research and development. This tax credit is usually renewed and extended by Congress each year, which is time consuming. In addition, many business owners are frustrated in some gaps in the tax credit. Hopefully this new cut will solve those issues. The estimated cost of this proposal is around $100 billion over 10 years.

In times like this, business owners need every bit of help they can get, and these tax breaks will go a long way in helping businesses of all sizes. In addition, the way these breaks are focused will drive more economic activity – after all, someone has to make and sell the capital equipment, and research and development are crucial to keeping America moving forward.

On the other hand, since we are facing incredible deficits, we will have to make up for the lost tax revenue somewhere. The question is, where will it come from?

(Hat tip, NPR )

The Jobless Stimulus: It's still not too late for business tax cuts

From the Wall Street Journal:

The recession may be over on Wall Street and Silicon Valley, but on Working Family Avenue it still has a ways to run. That's the lesson of yesterday's August jobs report that showed losses of 216,000, which believe it or not is the slowest monthly decline in a year and caused the White House to praise with the faint damn that the "trajectory is in the right direction." That's the good news.

On the other hand, the jobless rate popped up to 9.7%, the highest rate in 26 years, from 9.4%, reflecting an increase in the size of the labor force. The main concern we see going forward is the slow pace of new job creation to soak up the 7.4 million workers who have lost jobs since 2007.

There are now 26 million Americans who can't find a full-time job. Average weekly hours remained at an abysmally low 33.1—which is putting a strain on family budgets. And the jobless rate including so-called discouraged workers, or those who have stopped looking, leapt to 16.8% from 16.3% in July. Meanwhile, the number of Americans working part-time who want full-time work increased by 278,000 to 9.1 million, which as a share of the workforce is larger than at any time since the recession of 1982. These are the workers that employers will tend to hire first as a recovery unfolds, so it is worrisome that this cohort remains so large.

None of this does much for the credibility of the Obama Administration's stimulus spending plan, which was sold with the promise of a jobless rate this year of "below 8%" if the stimulus were passed. That was off by some three million jobs in a mere seven months. The same economists who fretted in February that $780 billion in stimulus was too small now claim that the $300 billion or so that has been spent has somehow ignited the recovery.

Apple Wins North Carolina Tax Break For $1 Billion Data Center

According to CNN.com a town in North Carolina has just given the green light to Apple Computers to build a giant data center in their county. The local government has agreed to provide the technology giant with over $46 million worth of tax incentives over the next decade, which undoubtedly led to the agreement.

The decision Monday helped spur Apple's plans to expand its network of data centers, which are warehouse-sized buildings that house vast numbers of giant computers known as servers. Data centers are usually used to manage the flow of Internet traffic. In Apple's case, the Maiden, NC data center could be used to bolster its iTunes music store business.

Apple has already agreed to invest $1 billion in the structure in Maiden, which is about 30 miles northwest of Charlotte, according to the agreement. If Apple invests an additional $1 billion into the data center, the county and town will provide another $20.7 million in incentives over another 10-year period.

"There is no commitment beyond the billion dollars," said Scott Millar, president of the Catawba County Economic Development Corp.

Tax Breaks Could Spur Business Investment

From The Washington Bureau:

The American Recovery and Reinvestment Act gives companies two reasons to invest in new equipment this year, and it provides many small businesses a way to find the money to make these purchases.

The economic stimulus package extended two tax incentives for business investment through the end of this year. Companies can write off 50 percent of the cost of new equipment immediately instead of following the usual depreciation schedules. Small businesses can expense up to $250,000 of new equipment purchases this year.

These breaks can be a powerful incentive for business investment, especially when combined, said Bill Smith, director of the national tax office for CBIZ MHM.

Smith cites an example of a small business investing $500,000 in equipment that normally is depreciated over five years. The business could take the $250,000 Section 179 expensing limit and then apply 50 percent bonus depreciation. The business could then depreciate $25,000 of the remaining $125,000 of the investment this year. The end result: The business could write off $400,000 of the $500,000 investment this year, instead of having to wait to recover this money.

That's good for cash flow, but many companies may not have the cash or credit to make this kind of investment, especially in such a weak economy.

Business tax breaks

Under the economic stimulus package:

Businesses can immediately write off 50 percent of the cost of new equipment purchased in 2009

Small businesses can immediately write off $250,000 for capital expenditures made this year

Small businesses with gross receipts of $15 million or less can carry back net operating losses for five years instead of two years

Some companies can defer taxes on certain types of business debt repurchased before 2011

Source: Senate Finance Committee

"A lot of small businesses aren't going to have the capacity to do it right now," said Clint Stretch, managing principal for tax policy at Deloitte Tax.

The economic stimulus package provides a solution, however, to businesses with less than $15 million in annual revenue. The new law allows these businesses to carry back net operating losses for five years, instead of the previous two-year limit. A business that currently is losing money could apply these losses to a previous profitable year and then claim a refund for taxes paid that year.

Congress Cuts Big Business Tax Break in Stimulus Bill

From Bloomberg.com:

House and Senate negotiators all but eliminated the biggest tax cut for businesses in the compromise agreement on an economic stimulus bill, Senator Max Baucus of Montana said.

The provision, a top priority of business groups including the National Association of Manufacturers and the U.S. Chamber of Commerce, would let companies convert losses into tax refunds.

Baucus said today that the provision, under which companies could have claimed an estimated $67.5 billion in tax refunds this year and next, was sacrificed to help keep the final package under $800 billion.

“It was a casualty of the overall limit,” said Baucus, a Democrat and chairman of the Senate Finance Committee. Congressional negotiators announced today an accord on a plan totaling $789 billion.

The provision, which would have let companies of any size amend up to five years of tax returns to deduct net operating losses they realize now, had been Companies under current law can carry losses back only two years.

In its place, Baucus said, negotiators agreed to let small businesses with annual receipts under $5 million carry back losses for five years.