Tax Breaks for Small Business in Fiscal Cliff Deal

By: John J Kasperek, E.A.

The Fiscal Cliff Deal (formally known as The American Taxpayer Relief Act of 2012) delivers good news for small and medium-sized businesses.

Here are highlights of the key provisions:

Section 179 Deduction. This popular provision permits small businesses to deduct in full the cost of certain property in the year placed in service rather than depreciating those costs over time.  The new law extends the maximum deduction to $500,000 for the 2012 and 2013 tax years for companies with under $2 million in qualifying capital expenditures.

Bonus Depreciation. Bonus depreciation creates an incentive to businesses to buy equipment by permitting first-year depreciation of 50 percent of the cost in the first year, rather than the standard depreciation schedule. The provision was originally set to expire at the end of 2012, but has been extended through the end of 2014.

15-Year Depreciation. Good news for restauranteurs, retailers, and leaseholders! The 15-year recovery period for certain restaurant and retail improvements, and new construction and leasehold improvements has been extended retroactively for 2012 and through 2013.

Work Opportunity Tax Credit. The new law extends through 2013 the tax credits for employers who hire certain employees facing barriers to employment.

R&D Tax Credit.  The law extends the research and experimentation tax credit (popularly known as the R&D credit).  Businesses can apply the credit retroactively to investments made in 2012. It has been extended through 2013.

Exclusion Of Gain On Small Business Stock. This helps businesses looking for investors. Under certain rules of IRC Section 324, 100% of the capital gain on the sale of small business stock can be excluded from income.  This has been extended for stock acquired through 2013.

Other Provisions.  Small and medium-sized business owners are tuned in as to how the Fiscal Cliff Deal impacts his/her personal affairs. Read this excellent summary in last week’s blog:

A related topic, on other tax changes for 2013, was covered in another well received blog: .

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