Friday, July 6, 2012

Significant tax changes for businesses in 2012: Part 2

This is part two, of the significant federal business tax changes occurring in 2011:

1. Energy Efficient Homes

For 2011, builders of energy efficient homes, qualified for a $2,000 credit per qualified home. In 2012, there is no deduction for these homes built.

2. Work Opportunity

In 2011 and prior there was a tax credit available for employers whom paid wages to several targeted groups. For 2012, the only group eligible for the tax credit are qualifying veterans.

3. Qualified Small Business Stock

Qualified Small Business Stock (QSBS) acquired during 2011 qualified for 100% gain exclusion, if certain holding period, and other restrictions were not applicable. In 2012, this gain exclusion is lowered to 50% of the gain, however, the same restrictions apply.

4. Domestic Production Activity Deduction (Section 199 QPAD)

The only major change to the QPAD is that Puerto Rico is no longer considered domestic production income, in the QPAD calculation in 2012.

Please note these items are likely to change throughout the year, as changes occur, I will not update this post, but will post subsequently! Please look for subsequent updates.

Tuesday, July 3, 2012

Significant tax changes for businesses in 2012

Nearly every year the tax code goes through significant changes. These changes are due primarily to the fact that political wrangling has trumped solutions to problems within this country. As a result, both political parties have figured out, that rather than solve the problems created by their own movements, and the harsh economic effects; finger pointing and delayed decision making, can insulate them from harsh criticism (preserving their own job = good for them). The result; rather than providing for long-term solutions to a snowballing problem of high government spending, coupled with lower government revenue, due to tax breaks to the highest earners and significantly lower actual earnings and employment levels for the lowest earners, we have a system where major changes to the tax code are nearly an annual occurrence. The only reason taxpayers have payed little attention is due to the fact, that by and large, Congress has swept through and extended nearly all the tax breaks from previous years, even if it does take nearly all year in some cases to push these tax breaks through (making tax planning a nail-biting endeavor).

Anyway, now that I have that out of my system I can focus on the real point of this post. Due to expiring tax breaks, 2012 and 2013 are very significant tax years. Without basic extensions of existing tax structure items, the tax landscape will be radically different in 2014. Here are some major tax changes in 2012, that will affect your business (unless Congressional action is taken):

1. Major changes to 179 depreciation.
A. Unlike 2011, there are no special depreciation provisions for the following types of property: Qualified leasehold improvements, Qualified restaurant property, and qualified retail property.

B. Also the expending limit and qualifying property thresholds are significantly lower in 2012. The amounts are now $139,000 and $560,000 respectively, down from $500,000 and 2,000,000 in 2011. Please remember these amounts still carry the normal income and other restrictions.

2. Major changes to Bonus Depreciation.

The special depreciation rate (168k Depreciation, as it is otherwise known) is 50% for qualifying property placed in service in 2012. This is down from the 2011 rate, which was a much more favorable 100%, for qualifying property (with certain restrictions).

See part 2 of this discussion later on in the week...

Please note these items are likely to change throughout the year, as changes occur, I will not update this post, but will post subsequently! Please look for subsequent updates.