Tax Planning: Tax Extenders and What They Mean for Your Business

This is the first post in a series discussing tax planning for businesses and individuals in the face of upcoming changes for tax year 2014, including Affordable Care Act responsibilities and the impact of new legislation. 

On December 19, 2014, President Obama signed into law a bill to renew dozens of temporary tax breaks commonly referred to as “tax extenders.” In total, 55 tax benefits, extended in the American Taxpayer Relief Act of 2012, expired on December 31, 2013. Congress voted to retroactively extend those benefits through tax-year 2014 only.

In November, Americans elected a Republican-controlled Congress that will convene in January 2015.  The change could create the possibility for comprehensive tax reform in 2015 or 2016. In the meantime, businesses should be aware of the tax extenders that could impact their next tax bill. Examples of recently renewed tax credits and deductions for businesses include:

• Research Tax Credit – Commonly known as the R&D tax credit, the research tax credit may be claimed for increases in business-related qualified research expenditures. The credit applies to businesses conducting research and experimentation, developing new or improved products, creating software, or engaging in engineering, architecture, scientific or technical services.
• Section 179 and Bonus Depreciation – The Section 179 expense deduction and the additional depreciation allowance (bonus depreciation) allow businesses to deduct the cost of qualified property purchases (e.g., equipment, software, office furniture) as an expense on their current year income tax returns. Both the Section 179 limit of $500,000 and the ability to take additional depreciation of 50% in the first year were renewed through December 31^st of this year to be retroactively applied to tax-year 2014.
• Work Opportunity Tax Credit (WOTC) – The WOTC is available to employers hiring individuals from certain groups that traditionally face barriers to employment, including qualified individuals in families receiving certain government benefits, veterans whose families receive food stamps or who have service-related disabilities, and individuals receiving supplemental Social Security income. The amount of the credit was generally 40% of the qualified worker’s first year wages up to $6,000. For qualified veterans, the amounts increase to $12,000, $14,000 or $24,000. For long-term family aid recipients, the credit is equal to 40% of the first $10,000 in qualified first-year wages and 50% of the first $10,000 of qualified second-year wages.

With the extension of tax credits through December 31, 2014, businesses should finalize tax planning and prepare to file. To learn about your business’ eligibility for certain tax credits and deductions, please contact me or another member of Kaufman Rossin’s tax department.