As regional administrator of the U.S. Small Business Administration, I travel throughout New York and meet with small-business owners. Recently, I heard from a few local owners who took advantage of a tax cut. Unfortunately, not all small businesses are as informed.
Many small businesses don’t realize that President Barack Obama has already signed into law 17 small-business tax cuts or that the president has proposed five more in his budget for 2013. These tax cuts are available to all types of small businesses, from Main Street shops to high-growth startups and everything in between.
The president knows that the story of America’s success has been written by our entrepreneurs and small-business owners, and that’s why he is doing everything he can to make sure small businesses have the tools they need to create an economy built to last.
How can your business benefit from tax breaks this year?
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 businesses. Capital gains on investments held more than five years in qualified small businesses are 100 percent exempt for the 2012 tax year.
Are you a startup? Entrepreneurs can deduct $5,000 for startup expenditures, and the president is working to double this deduction in his budget for 2013.
Are you a small-business owner who has purchased new equipment? If so, you can write off a larger portion of its cost this year, rather than depreciating the cost over time. The president has raised the maximum amount a small business can expense on new equipment to $560,000 in 2012, up from $250,000 in 2009.
In addition, the president has signed legislation that allows businesses to write off the cost of their equipment purchases faster by allowing up to 50 percent bonus depreciation in the first year of an investment.
Are you a small-business owner who provides health care to your employees or to yourself? Tax credits are available for starting or continuing to provide health insurance coverage for your employees-and this applies even if you are self-employed.
Have you been in business for up to five years? You may "carry back" your business credit up to five years to offset taxes and cope with difficult economic times. Businesses can apply their 2011 credits to previous tax payments going back to 2006.
Are you a small-business owner who uses a cellphone? Starting in 2010, the process for deducting the cost of your cellphone and monthly bills was vastly simplified.
As you can see, there are a lot of tax cuts that small businesses can benefit from this year, but small firms stand to gain even more from a number of recent proposals the president has put forward. These proposals include:
- permanently eliminating taxes on capital gains in key investments;
- adding a 10 percent income tax credit on aggregate wages in 2012 over 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; and
- eliminating complicated depreciation schedules for most small businesses and simplifying tax returns by streamlining the home office deduction.
The president has also announced a framework for reducing and simplifying the U.S. 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 tax filing simpler for small businesses and entrepreneurs, so they can focus on growing their businesses rather than filling out tax returns.
Please be sure to stay tuned to what the SBA is doing to assist small businesses, helping them start and grow and creating an economy built to last. Follow us on Twitter #SBAatlantic and on Facebook at SBA Atlantic, or contact your local Buffalo District office at www.sba.gov/ny/buffalo.
Jorge Silva-Puras is regional administrator of the U.S. Small Business Administration.
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