3 tax law changes for tax year 2016

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2016 is in the books! It was a big year for change (for sports fans, the Cubs winning the World Series for the first time since before our grandparents were born tops that list). There are some big changes that happened in other areas as well (and some not so unusual). Every year, Congress makes changes to the tax code that affect taxpayers across the country — including a few tax law changes that affect small business owners.

Take note of these tax law changes

Let’s take a look at three tax law changes you need to be aware of as you sit down to do your taxes.

1. Due dates

When is your tax return due?

  • If you run your business as a sole proprietor, an LLC, or a partner in a regular partnership, your tax return is due on April 18, 2017.
  • If you are part of an electing large partnership or have a business set up as an S Corporation or C Corporation, your return is due on March 15, 2017.
  • However, if your fiscal year doesn’t end on December 31, and you have a corporation, your corporation’s tax return is due on the 15th day of the fourth month following your fiscal year’s last quarter.

Tax Law Changes Calendar2. Healthcare

Of course, healthcare remains in the news. As you might know, the Affordable Care Act does have several provisions that provide incentives to small business owners to offer their employees health insurance. As part of the law, if you have more than 50 full-time employees, you are required to offer healthcare benefits to your employees.

You will face penalties if you do not provide employees with health insurance.

 

The fine for not offering health insurance to at least 70 percent of your full-time employees is $2,000 per employee.

However, if you are a small business that employs fewer than 25 workers, you may qualify for the Small Business Health Care Tax Credit. You can take this tax credit — which is equal to 50 percent of the premiums you pay as a small business owner — for two consecutive tax years. In order to be eligible for the credit, you have to have paid premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace, or be exempted from this requirement.

3. Equipment purchases

Back in December 2015, Congress passed the Protecting Americans from Tax Hikes (PATH) Act. As part of the act, the Section 179 deduction for equipment purchases was extended for 2016.

This provision allows you, as a business owner, to deduct up to $500,000 of the cost of property used in your business, as long as you use the equipment or property for business purposes at least 50 percent of the time.

However, you can only purchase up to $2 million of commercial property in qualifying for Section 179.

In addition to the section 179 deductions, the bonus depreciation laws that had expired in 2014 were renewed for 2016. This additional depreciation will allow you to deduct a large portion of the cost of a piece of equipment that can be used over the long-term. Through 2017, the depreciation percentage will be 50 percent, but there is a possibility that the percentage might drop to 40 percent in 2018 and 30 percent in 2019.

The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

Chris Peden
Chris Peden, CPA, CMA, CFM has spent more than 15 years in the corporate world helping companies meet their regulatory compliance requirements. He also assists small business owners with organizing and making sense of their finance information.