Tax Reform: The Impact on Your Business<br />Presented by<br />Robert LeMay, CPA<br />of<br />LeMay & Company<br />A Virgi...
Changes in business expensing rules<br /><ul><li>Bonus depreciation extended; temporary 100% deduction in placed-in-servic...
Enhanced small business expensing (Section 179 expensing)
First-year depreciation cap for 2011/2012 autos and trucks boosted by $8,000
Cell Phone treatment
Start Up Expenses</li></li></ul><li>Bonus depreciation extended and increased<br /><ul><li>Previously equal to 50% of the ...
New law... 100% of the cost of qualified property placed in service after Sept. 8, 2010 and before Jan. 1, 2012 and 50% of...
Enhanced small business expensing <br />(Section 179 expensing)<br /><ul><li>Old rules, taxpayers could expense up to $250...
New rules, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment limit ...
Also makes certain real property eligible for expensing. Thus, for property placed in service in any tax year beginning in...
2010, the adjusted first-year limit is $3,060 for passenger cars
For light trucks or vans, the adjusted first-year limit is $3,160
First-year depreciation limit is increased by $8,000
The 2010 Tax Relief Act provides that the placed-in-service deadline for “qualified property” is Dec. 31, 2013 </li></li><...
Listed property is property used for business no more than 50% of the time. Listed property includes such items as vehicle...
Treated just like other business property, without onerous recordkeeping requirements</li></li></ul><li>Boosted deduction ...
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Tax Reform: The impact on Your Business

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Tax Reform: The impact on Your Business

  1. 1. Tax Reform: The Impact on Your Business<br />Presented by<br />Robert LeMay, CPA<br />of<br />LeMay & Company<br />A Virginia Certified Public Accounting Firm<br />
  2. 2. Changes in business expensing rules<br /><ul><li>Bonus depreciation extended; temporary 100% deduction in placed-in-service year.
  3. 3. Enhanced small business expensing (Section 179 expensing)
  4. 4. First-year depreciation cap for 2011/2012 autos and trucks boosted by $8,000
  5. 5. Cell Phone treatment
  6. 6. Start Up Expenses</li></li></ul><li>Bonus depreciation extended and increased<br /><ul><li>Previously equal to 50% of the adjusted basis of qualified property acquired and placed in service before Jan. 1, 2011
  7. 7. New law... 100% of the cost of qualified property placed in service after Sept. 8, 2010 and before Jan. 1, 2012 and 50% of the cost of qualified property placed in service after Dec. 31, 2011 and before Jan. 1, 2013</li></li></ul><li>What is Qualified Property?<br />Qualified property falls into one of the following categories<br />…Property to which the modified accelerated cost recovery system (MACRS) rules apply with a recovery period of 20 years or less; qualified leasehold improvement property; or certain water utility property<br />...It is placed in service before Jan. 1, 2011<br />...Its original use commences with the taxpayer. Original use is the first use to which the property is put, whether or not that use corresponds to the taxpayer's use of the property<br />
  8. 8. Enhanced small business expensing <br />(Section 179 expensing)<br /><ul><li>Old rules, taxpayers could expense up to $250,000 of qualifying property—generally, machinery, equipment and software—placed in service in during the tax year. This annual limit was reduced by the amount by which the cost of property placed in service exceeded $800,000
  9. 9. New rules, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment limit to $2,000,000
  10. 10. Also makes certain real property eligible for expensing. Thus, for property placed in service in any tax year beginning in 2010 or 2011, the $500,000 amount can include up to $250,000 of qualified leasehold improvement, restaurant and retail improvement property</li></li></ul><li>First-year depreciation cap for 2011/2012 <br />autos and trucks boosted by $8,000.<br /><ul><li>Dollar limits of depreciation deductions (including section 179expensing) that can be claimed for passenger autos are subject to dollar limits
  11. 11. 2010, the adjusted first-year limit is $3,060 for passenger cars
  12. 12. For light trucks or vans, the adjusted first-year limit is $3,160
  13. 13. First-year depreciation limit is increased by $8,000
  14. 14. The 2010 Tax Relief Act provides that the placed-in-service deadline for “qualified property” is Dec. 31, 2013 </li></li></ul><li>Cell phone treatment<br /><ul><li>No longer listed property
  15. 15. Listed property is property used for business no more than 50% of the time. Listed property includes such items as vehicles, computer equipment and cell phones
  16. 16. Treated just like other business property, without onerous recordkeeping requirements</li></li></ul><li>Boosted deduction for start-up expenditures<br /><ul><li>Start-up expenses are expenses incurred before the business entity has started operations
  17. 17. Old law, the limit of these deductions was capped at $5,000, subject to a $50,000 phase-out threshold
  18. 18. New law allows taxpayers to deduct up to $10,000 in trade or business start-up expenditures for 2010. The amount that a business can deduct is reduced by the amount by which startup expenditures exceed $60,000</li></li></ul><li>Payroll tax cut<br /><ul><li>The new law provides a payroll tax cut for employees.
  19. 19. Effective for calendar year 2011, Social Security taxes is reduced from 6.2 percent to 4.2 percent, up to the taxable wage base of $106,800
  20. 20. Self-employed individuals will get an equivalent tax break, paying 10.4 percent on self-employment income up to the wage base (reduced from the normal 12.4 percent rate)
  21. 21. Replaces the Making Work Pay credit that has been in place for 2009 and 2010
  22. 22. Unlike the Making Work Pay credit, the payroll tax cut does not exclude individuals based on their earnings</li></li></ul><li>Work opportunity tax credit extended<br /><ul><li>The work opportunity tax credit (WOTC) allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of first-year wages up to $6,000 per employee ($12,000 for qualified veterans; and $3,000 for qualified summer youth employees).
  23. 23. Under pre-Act law, wages for purposes of the credit doesn't include any amount paid or incurred for an individual who began work after Aug. 31, 2011.
  24. 24. New law. The 2010 Tax Relief Act extends the WOTC four months to include individual who began work before Jan. 1, 2012. </li></li></ul><li>Work opportunity tax credit continued…<br /><ul><li>Where the employee is a long-term family assistance (LTFA) recipient, the WOTC is a percentage of first and second year wages, up to $10,000 per employee.
  25. 25. Generally, the percentage of qualifying wages is 40% of first-year wages; it's 25% for employees who have completed at least 120 hours, but less than 400 hours of service for the employer
  26. 26. For LTFA recipients, it includes an additional 50% of qualified second-year wages
  27. 27. To claim, you must get certification from the state employment security agency that the employee is part of the targeted groups</li></li></ul><li>100% exclusion of gain from the sale of small business stock<br /><ul><li>Ordinarily, individuals can exclude 50% of their gain on the sale of qualified small business stock (QSBS) held for at least five years
  28. 28. Was temporarily increased to 75% for stock acquired after Feb. 17, 2009 and before Jan. 1, 2011
  29. 29. New Law temporarily increases the exclusion yet again, to 100% of the gain from the sale of qualifying small business stock
  30. 30. Must be acquired in 2010 after September 27, 2010
  31. 31. Held for more than five years</li></li></ul><li>S corporation holding period for appreciated assets shortened to 5yrs<br /><ul><li>C corporation converting to an S corporation
  32. 32. Hold onto any appreciated assets for 10 years or face a built-in gain tax at the highest corporate rate of 35%
  33. 33. New law shortens the holding period of assets subject to the built-in gains tax to 5 years if the 5th tax year in the holding period precedes the tax year beginning in 2011</li></li></ul><li>Tax credits to certain small employers that provide insurance<br /><ul><li>Provides small employers with a tax credit for non-elective contributions to purchase health insurance for their employees
  34. 34. Self-employed individuals and their family members, including partners and sole proprietors, two percent shareholders of an S corporation, and five percent owners of the employer are not treated as employees
  35. 35. To qualify:
  36. 36. Contribute at least half the total premium cost
  37. 37. Have no more than 25 full-time equivalent employees (“FTEs”)
  38. 38. Have annual full-time equivalent wages that average no more than $50,000</li></li></ul><li>Healthcare credit continued…<br /><ul><li>Full amount of the credit is available only to an employer with 10 or fewer FTEs with average wages of not more than $25,000, above this a phase out begins
  39. 39. For tax years 2010 through 2013, the credit is 35% of premiums paid
  40. 40. Beginning in 2014 increases to 50%
  41. 41. Number of FTEs is equal to the total hours paid divided by 2080.
  42. 42. 15 employees worked 18,720 hours, FTEs would be 9
  43. 43. Average FTE wage equals your total payroll divided by the number of FTEs.
  44. 44. Annual payroll is $193,500 and 9 FTEs, you average wage would be $21,500</li></li></ul><li>Deductibility of health insurance for the purpose of calculating <br />self-employment tax<br /><ul><li>Business owners are allowed to deduct the cost of health insurance incurred in 2010 for themselves and their family members in calculating their 2010 self-employment tax</li>

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