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Tax Breaks for Your Business

Tax planning is critical for businesses, and business owners should explore the tax incentives that are available with their attorneys before some of them expire.

The U.S. Small Business Administration has compiled a list of tax breaks that are set to expire on December 31, 2013 unless Congress extends them:

  • Equipment Purchase Deductions: Instead of merely taking depreciation deductions over time, if your business is profitable, you can deduct up to $500,000 of the cost of qualified equipment such as computers and machinery. Next year, the deduction is going to be drastically reduced to $25,000. You can also deduct 50 percent of the cost of new qualified equipment, even if it adds to or creates a business loss. This deduction is going to be eliminated next year.
  • Faster Capital Improvement Write-Offs: Normally, the cost of capital improvements can only be depreciated over a period of 39 years. However, if improvements are completed before the end of this year, businesses can deduct $250,000 first-year expensing for eligible improvements. Additionally, they can receive 50 percent bonus depreciation for eligible improvements and a 15-year amortization period for costs not deducted with first-year expensing or bonus depreciation.
  • Tax Credits for Hiring Workers from Target Groups: There are work opportunity credits for hiring certain disadvantaged workers, including certain veterans and Native Americans before the end of the year. Further, you can receive empowerment employment credit if your business is located within a federally designated empowerment zone.
  • Issuing “Qualified Small Business Stock”: If C corporations involved in technology, manufacturing, retail or wholesale issue qualified small business stock and investors hold it for more than five years, their gains are tax-free.
  • Research Tax Credit: If a company does research to create a new product or to improve internal business procedures, it may be eligible for a tax credit of up to 20 percent of increased research expenses.

Many tax incentives are time-sensitive or set to expire. If you have questions about tax planning for your business, contact experienced Washington, D.C. attorneys who can provide legal guidance tailored to your unique needs.

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