If you overlooked the PATH Act when it was signed into law in December 2015, you should take a look now for the benefit of your business. The law includes tax breaks that, if your business qualifies, could help when it comes to purchasing equipment, hiring employees and more.
Here are a few of the business tax credits or deductions you’ll find in the Protecting Americans from Tax Hikes (PATH) Act.
Equipment and Other Qualifying Property
Section 179 Expensing. The provision permanently extends the small business expensing limitation and phase-out amounts ($500,000 and $2 million, respectively). The deduction limit starts to phase out when qualified property placed in service during the year is more than $2 million. Both limits have been made permanent and will be adjusted for inflation starting in 2016 ($2,010,000 is the phase out amount for TY2016).
Bonus Depreciation. The 50% bonus depreciation, which allows taxpayers to claim an additional first-year depreciation deduction, will apply to qualified business assets placed in service in 2015 to 2017. Bonus depreciation for five years will be phased-down through 2019 per the following schedule:
- 50% for 2015-2017
- 40% in 2018
- 30% in 2019
Work Opportunity Tax Credit. The PATH Act extended and expanded the credit, which serves as a tax incentive for employers to hire certain categories of workers. The act made the following changes:
- Extended the Work Opportunity Tax Credit through 2019.
- Added a 40 percent credit up to the first $6,000 in wages. This has been added for employers who hire qualified long-term unemployed individuals who have been out of work for 27 weeks or more.
Employer Wage Credit. This provision provides a 20-percent employer wage credit for employees called to active duty. It was made permanent and expanded. Beginning in 2016, the credit applies to employers of any size, instead of those with 50 or fewer employees, as under current law.
Research and Development
Research and Development Tax Credit. The law permanently extended the credit, and, starting in 2016, eligible small business with $50 million or less in gross receipts can claim the credit against alternative minimum tax (AMT) liability.
This is just a sampling of the credits and deductions that are part of the PATH Act, so be sure to review the law with your tax preparer to see what else it may provide in terms of tax relief for your business.