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Top 2016 Tax Deduction Changes for Business Owners

  • 9 February 2016
  • Author: Cari Holbrook
  • Number of views: 2450
Top 2016 Tax Deduction Changes for Business Owners

As usual, Congress’ procrastination resulted in some last-minute legislation. Here’s a summary of the top tax changes that will affect business owners in 2016:

  1. Section 179 deduction: The Section 179 expensing provision has finally been retroactively, increased from $25,000 to $500,000, effective January 1, 2015. The phase-out remains at $2,000,000. This change has now been made permanent and, following the 2016 tax year, both amounts are indexed for inflation. Section 179 allows a current deduction for the cost of qualifying property in the year it is placed in service. The rule most commonly applies to equipment and vehicle purchases, but it can also apply to qualifying  off-the-shelf software, property improvements, and other large purchases. For more on the Section 179 deduction, see our recent blog post.
  2. Other deductions that have been made permanent: Beginning in 2016, air conditioning and heating units used for business will be eligible for full expensing in the year purchased. Additionally, a 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements has been made permanent.
  3. Bonus depreciation is extended: 50 percent bonus depreciation is extended for property placed into service during 2015, 2016 and 2017. Current law provides for it to be reduced to 40 percent for 2018 and 30 percent for 2019.
  4. Work opportunity tax credit is extended: The credit, which enables employers to receive a credit of up to $2,400 per employee for hiring individuals who have exhausted state and federal unemployment benefits, is now extended through 2019. It is also modified in 2016 for employers who hire qualified long-term (27 weeks or more) unemployed individuals and increases the credit to 40 percent of the first $6,000 of wages.

For more on these and other 2016 tax changes, see our recent Bankler Report. And, as always, feel free to contact us for specific questions.

Image Copyright: fuzzbones / 123RF Stock Photo

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