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When you operate a business, you have a variety of tax breaks available.
The recently enacted Consolidated Appropriations Act extends and expands some of the breaks. We bring the following selection of them to your attention as a tax-strategy buffet.
- You can deduct 100 percent of your dine-in and take-out business meals provided by restaurants in 2021 and 2022.
- For hiring members of 10 targeted groups, you can obtain the work opportunity tax credit for first-year wages through 2025.
- You can now qualify for the 39 percent new markets tax credit for investments through 2025.
- The empowerment zone tax breaks scheduled to expire on December 31, 2020, are extended through 2025. Still, the new law terminates, for 2021 and later, both (a) the enhanced first-year depreciation rules and (b) the capital gains tax deferral break.
- Employers may continue through 2025, making Section 127 education plan payments covering student loan principal and interest up to the plan maximum of $5,250.
- For residential rental property that you placed in service before 2018 and were depreciating over 40 years under the straight-line method, you can now use 30 years if you elect out of the Tax Cuts and Jobs Act business interest expense limitations.
- Farmers may elect a two-year net operating loss carryback rather than the five-year carryback retroactively as if this change were in the original CARES Act.
- The $1.80 per-square-foot or $0.60 per-square-foot deductions for energy-efficient improvements to commercial buildings are now permanent.
- Small Business Administration Economic Injury Disaster Loan advances and loan repayment assistance are not taxable, and you suffer no tax attribute reductions as a result of the tax-free monies.
- Manufacturers of residential homes can claim a credit of $1,000 or $2,000 for homes that meet applicable energy-efficiency standards through 2021.
- Your business can claim a business federal income tax credit for up to 30 percent of the cost of installing non-hydrogen alternative-fuel vehicle refueling equipment (say, for your employees' electric vehicles) through 2021.
- Your business can claim a federal income tax credit for buying vehicles propelled by chemically combining oxygen with hydrogen to create electricity through 2021 (credits range from $4,000 to $40,000).
- The new law extends the seven-year recovery period to cover motorsports entertainment complex property placed in service through 2025.
- You can elect to claim the first-year write-off for the cost of qualified film, television, and theatrical productions commencing before 2025, subject to a $15 million per-production limit or a $20 million limit for productions in certain disadvantaged areas.
- For racehorses that are no more than two years old that you place in service during 2021, you may use three-year depreciation.
You do have to admire the opportunities that the tax law contains to help businesses.
Book a time here, and let's chat.
Miguel A. Palma, CPA, PFS, CGMA
Founder of Palma Financial Services, Inc.
Palma Financial Services, Inc. ("PFS")has helped small business owners minimize income taxes and build wealth since 1998.
PFS has achieved positive results for its clients, but our top clients' successes are not typical. Because past performance is not a predictor of future success, you may have more or less success depending on many factors, including your background, experience, work ethic, client base, and market forces. Additionally, at times we may discuss the law or new and pending legislation. Please know our understanding of it is continuously changing. You cannot and should not rely upon these communications for legal, financial, or accounting advice. For the latest updates, set up a time here.