With each new year comes new changes in the tax world. Your CPAs in Springfield Missouri know you can always expect changes to be made in both personal and business tax law, especially with the Tax Cuts and Jobs Act of 2017 (TCJA) provisions now coming into full effect in the year of 2019.
Standard Mileage Rates for Businesses
This year, the rate for miles driven is 58 cents per mile, up from 54.5 cents per mile in 2018.
Section 179 Expense Deduction
In 2019, the Section 179 expense deduction increases to a deduction of $1,020,000 of the first $2,550,000 of qualifying capital property, equipment, used during the current tax year. After the year of 2018, the limits are to be indexed to inflation. Businesses may now also take this deduction for nonresidential qualifying real property (buildings) improvements. These improvements must be made after the building is in use.
This includes improvements to a building’s interior for:
- Enlargement of the building
- Elevators or escalators
- The internal structure of the building (walls, security systems, air-conditioning systems, etc.)
If these items are included in the original construction, they may be deductible expenses under a different category.
Section 179 of the IRS Code was enacted to help small businesses by allowing them to take a depreciation deduction for certain assets in one year, rather than depreciating them over a longer period of time. Taking a deduction on an asset in its first year is called a “Section 179 deduction.” There is a benefit to taking the full deduction for the cost of the item immediately, rather than being required to spread out the deduction over the item’s useful life for items such as office equipment (printer, computers, etc.).
Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026.
Work Opportunity Tax Credit (WOTC)
The Work Opportunity Tax Credit was extended for the year of 2019. It has been changed and enhanced for companies who hire long-term unemployed individuals and is about equal to 40 percent of the first $6,000 an employer paid to the new employee. Hires are considered long-term unemployed if unemployed for 27 weeks or more. The IRS considers target groups such as qualified veterans, ex-felons, Social Security Income recipients, and more.
Research & Development Tax Credit
Starting in 2018, companies with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Start-ups that might not have any income tax liability will be able to offset payroll taxes with R&D credit as well.
Employee Health Insurance Expenses
For taxable years beginning in 2019, the dollar amount of average wages is $27,100 (up from $26,600 in 2018). This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.
Note these changes to tax law in the year ahead but recognize that additional changes in tax law are likely to occur throughout the year. Please call if you have any questions about getting ahead on business tax planning for 2019 or seek someone to help with your business accounting in Springfield Missouri.