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At the beginning of this year's tax season, I asked myself what tax law changes should be considered. Of course, the Affordable Care Act initially comes to mind, but it is still being enacted and fine-tuned.
Tax laws are always changing because of the demand on funds, or government budgeting, is always changing.
This is where local tax professionals come into the picture. They are continually updating their knowledge on the changing laws and offer more than just income tax preparation. Utilize your tax professional as your business partner and help minimize the unwelcome surprises tax season can bring today and in the future.
1. Accelerated Cost Recovery
New or used depreciable assets placed in service in 2013 can be expensed up to $500,000 with a maximum investment limit of $2,000,000. This is known as Section 179 depreciation. The expense ceiling is scheduled to revert to $25,000 in 2014 unless Congress enacts further legislation.
2. Additional First Year Depreciation of 50%
More commonly known as bonus depreciation, this can be taken on new depreciable assets that were also placed in service in 2013. Bonus depreciation is elected by recovery period so some assets can use bonuses while others can use Section 179. This gives the taxpayer a wide latitude of options for depreciating assets, and in turn, minimizing the bottom line of their business. Bonus depreciation also gives an option to taxpayers who buy a new business vehicle under 6,000 pounds to expense an additional $8,000 in the first year. Bonus depreciation is also set to expire January 1, 2014.
3. Faster Recovery Periods
The number of years over which you are allowed to depreciate an asset remains at 15 years for qualified real property including leasehold (interior) improvements, retail improvements and restaurant property. Generally this class of assets has the same recovery period and method as the improved property which could be as long as 39 years for a commercial building or as short as the time remaining on the lease of the property. Qualified leasehold improvements can also take advantage of the 50 percent bonus depreciation available for property placed in service prior to January 1, 2014.
4. Employers Providing Child Care Facilities
Credit for employers who provide child care facilities has been made permanent. An employer who provides child care facilities will be eligible for a 25 percent credit of qualifying costs; employers who provide only resource and referral services are eligible for a 10 percent credit.
5. Legal Same-sex Marriages
Now recognized for all federal tax purposes, couples who validly enter into marriage in a jurisdiction where the marriage is authorized will be allowed to file as Married Filing Joint or Married Filing Separate. If the couple now lives in a jurisdiction that does not recognize same-sex marriage they will still be treated as married for federal tax purposes. Nebraska will not allow same-sex couples to file jointly, so they must continue to file as single, or if qualified, head-of-household.
6. 39.6% Federal Income Tax Bracket Restored Top capital gains rate also rises to 20 percent for those taxpayers. There is also an increased Medicare tax of 0.9 percent beginning in 2013 for wages exceeding a threshold of $200,000 for single and $250,000 for married taxpayers.
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