The Fiscal Cliff deal was messy.
In a statement on New Year’s Day, President Barack Obama admitted that the new deal was not reached without heavy compromise. However, while Washington works to balance the budget and reduce the national deficit, we asked the question – what does the new deal mean for Small Businesses in the upcoming year?
The big news is that the vast majority (97%) of businesses will not see their income taxes go up in the coming year. In addition, several tax incentives have been extended that are specifically designed to increase capital investment, innovation, and the hiring of new workers.
Here’s a list of some incentives that are being extended into the New Year:
R&D Tax Credit
This credit, which originally expired in 2011, allows businesses to qualify for tax credits based on their ability to test and improve new innovations in various sectors of the economy. The credit could save a business up to 20%, but is only eligible to ‘qualified’ participants. Click here for more information.
Section 179 Deduction
This deduction allows businesses to deduct the full purchase price of equipment or software purchased or financed during that tax year. This is great news for small businesses and can be extended to the purchase of machinery and equipment as well as that Point of Sale software you’ve had your eyes on this past year, though some definitions of the deduction require the purchased property to be tangible. Before the deal, the deduction was limited to $125,000 but has since been increased to $500,000 in 2013.
Work Opportunity Tax Credit
Extended into 2013, the Work Opportunity Tax Credit can save up to 40% of qualified wages you pay to workers who have a military background or come from an under-served community. It’s a nice incentive to empower and employ our Veterans as well as our under-served communities.
New Markets Tax Credit
Originally passed in 2000, this tax credit is for businesses that invest in qualified community development initiatives and can equal up to 39% of the investment paid out over the course of seven years. The credit was created to incentive business solutions to help disadvantaged communities. For more information, visit your local Community Development Financial Institution or visit the CDFI Fund government website
Whether investing in new equipment, hiring a new employee, researching new technology, or investing in your local communities, it’s important to know that there is most likely an tax credit or incentive that’s available for your business to take advantage of.