As regional administrator of the U.S. Small Business Administration, I travel throughout Colorado and meet with small business owners. They often express their frustration with taxes and regulations.
What many small business owners don’t realize is that 17 small business tax cuts have been signed into law or that the Barack Obama administration has included an additional five small business tax cuts in its 2013 budget proposal. These tax cuts are available to all types of small businesses, from Main Street shops to high-growth startups and everything in between.
So, how can tax breaks benefit your business benefit this year? See if the answers to some of these questions apply to your operation.
Are you an investor in a small business? Some capital gains have been fully eliminated on certain small business stock, which provides an incentive for financiers to invest in qualified small business. Capital gains on investments held more than five years in qualified small businesses are 100 percent exempt for the 2012 tax year.
Have you started a new business? Entrepreneurs can deduct $5,000 for startup expenditures, and President Barack Obama is working to double this deduction in his budget for 2013.
Have you purchased new equipment? If you’ve bought new equipment, you can write off a larger portion of the cost of that new equipment this year rather than depreciating the cost over time. The maximum amount a small business can expense on new equipment has been increased to $560,000 in 2012, up from $250,000 in 2009. In addition, businesses are allowed to write off the cost of their equipment purchases more quickly by allowing up to a 50 percent bonus depreciation in the first year of an investment.
Do you provide health care benefits to your employees or yourself? Tax credits are available for starting or continuing to provide health insurance coverage for your employees. This applies to even those who are are self-employed.
Have you been business for up to five years? You may “carry back” your business credit up to five years to offset taxes and assist in difficult economic times. Businesses can apply their 2011 credits to previous tax payments going back to 2006.
Do you use a cell phone? Starting in 2010, the process for deducting the cost of your cell phone and monthly bills was vastly simplified.
As you can see, there are a lot of tax cuts from which small businesses can benefit this year. But small businesses stand to gain even more from a number of recent proposals President Obama has put forward in his 2013 budget, including:
Permanently eliminating taxes on capital gains in key investments.
A 10 percent income tax credit on aggregate wages in 2012 in excess of those in 2011.
Permanently doubling the amount of startup expenses entrepreneurs can deduct from their taxes to $10,000.
Expanding the health care tax credit to small businesses with up to 50 employees.
nliminating complicated depreciation schedules for most small businesses and simplifying tax returns by streamlining home office deductions.
A framework also has been announced for reducing and simplifying the tax system to enhance American competitiveness. This includes lowering the corporate tax rate from 35 percent to 28 percent and reforming the tax code to make filing simpler for small businesses and entrepreneurs so they can focus on growing their businesses rather than filling out tax returns.
Stay tuned to what the SBA is doing to assist small businesses and help them grow an economy built to last. Additional information about managing taxes is available online at www.sba.gov. Enter “taxes” in a key word search. of the Web site.