Small Business To See Bigger Tax Breaks, New Health Care Options
By Joyce M. Rosenberg. Updated January 11, 2017.
Each year, business owners can count on changes in tax law and other rules. For 2017, small businesses are getting a bigger deduction for equipment purchases, and those that aren't required to provide health insurance will have an option to help staffers pay for coverage. Many companies have new filing deadlines for their tax returns, and owners who use their cars for business will get a slightly smaller deduction.
A look at some of the changes owners will see in this new year:
Small businesses buying many types of equipment get a bigger tax break in 2017. The Section 179 deduction will be $510,000, up $10,000 from 2016, an adjustment to account for the effects of inflation.
The deduction, intended for small businesses, lets them deduct up-front rather than depreciate the costs of equipment like computers, vehicles, manufacturing machines and furniture, as well as some types of real property. But air conditioning and heating equipment, and land and improvements to land like paved parking areas are not eligible for the deduction.
If a business spends more than $2,030,000 on equipment that qualifies for the Section 179 deduction, the tax break is reduced by the amount they spend that exceeds $2,030,000. However, companies can depreciate equipment that doesn't qualify for the Section179 break, and get a deduction that way.
You can learn more about Section 179 deductions and depreciation in IRS Publication 946, How to Depreciate Property. You can find it on the IRS website, www.irs.gov .
Stand-Alone HRAs Are Now Legal
Small business owners who aren't required to offer health insurance to staffers but want to help them pay for coverage can now do so through what are known as Health Reimbursement Arrangements.
HRAs have been legal under the health care law only if employers offered insurance that met the law's requirements and provided the HRAs as one alternative that employees could choose. But owners who were exempt under the law because they had fewer than 50 staffers couldn't simply give workers stipends or other non-taxed pay to defray the cost of individual policies.
The 21st Century Cures Act that President Barack Obama signed into law last month allows small businesses exempt from the law to create what are called stand-alone HRAs to reimburse employees for health-related expenses, including insurance. There is a limit of $4,950 for an individual employee or $10,000 if an employer wants to pay for a staffer's family's expenses. The law provides for annual increases tied to the inflation rate.
New Filing Dates for Some Business Tax Returns
Two laws passed by Congress changed the deadlines for many businesses to file important documents and returns with the IRS.
The changes in filing dates do not affect company owners who report their business income on Form 1040. That date in 2017 will be April 18; the usual April 15 deadline falls on a Saturday, and Emancipation Day, a federal holiday in the nation's capital, is observed on April 17.
The changes do affect partnerships and companies known as C corporations:
--Partnership returns are now due March 15. They previously were due April 15.
--Returns for C corporations are now due in April, a change from the previous date of March 15.
The changes were included in the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. The accounting industry had asked for the changes to help simplify the tax filing process for businesses.
A separate law passed in December, requires employers to file W-2 forms and some 1099 forms with the government by Jan. 31. Employers were already required to give those forms to employees and independent contractors by Jan. 31, but previously had until the end of February to submit them to the government.
Using Your Car for Business
The IRS has set the standard mileage rate for business use for a car at 53.5 cents per mile for 2017. That's down half a cent from 2016.
The government takes into consideration the fluctuating costs of operating a car when it sets the standard mileage rate each year. The rate is one of two methods for an owner to account for how much was spent on using a car for business; the second is to deduct the actual expenses for the car. An owner opting for actual expenses must calculate the percentage of miles the car is driven for business reasons, and apply that percentage to expenses like lease payments, fuel, maintenance, repairs and insurance. An owner can also deduct depreciation.
If business owners want to use the standard mileage rate, they must use it in the first year a car is available to be used for business. That's either the year the car is acquired or the first year that the owner is in business. Starting with the second year, they can choose either method.
You can learn more about deducting the business use of a car in IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.