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Small Business Tax Deductions in 2017

by Matthew Person on January 5, 2017

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In 2017, many small businesses are eligible for a bigger deduction on equipment purchases, and those that aren’t required to provide health insurance will have an option to help staffers pay for coverage. Additionally, many companies have new filing deadlines for their tax returns, and owners who use their cars for business will get a slightly smaller deduction.

Here are some of the other changes owners will see in this new year:

Deductions:

  • Small businesses buying many types of equipment get a bigger tax break in 2017. The Section 179 deduction will be $510,000, up $10,000 from 2016, an adjustment to account for the effects of inflation.
  • The deduction, intended for small businesses, lets them deduct up-front rather than depreciate the costs of equipment like computers, vehicles, manufacturing machines and furniture, as well as some types of real property. However air conditioning and heating equipment, and land and improvements to land like paved parking areas are not eligible for the deduction.
  • If a business spends more than $2,030,000 on equipment that qualifies for the Section 179 deduction, the tax break is reduced by the amount they spend that exceeds $2,030,000. However, companies can depreciate equipment that doesn’t qualify for the Section 179 break, and get a deduction that way.

Stand Alone HRAs

Small business owners who aren’t required to offer health insurance to staffers but want to help them pay for coverage can now do so through what are known as Health Reimbursement Arrangements.

  • HRAs have been legal under the health care law only if employers offered insurance that met the law’s requirements and provided the HRAs as one alternative that employees could choose. But owners who were exempt under the law because they had fewer than 50 staffers couldn’t simply give workers stipends or other non-taxed pay to defray the cost of individual policies.
  • The 21st Century Cures Act that President Barack Obama signed into law last month allows small businesses exempt from the law to create what are called stand-alone HRAs to reimburse employees for health-related expenses, including insurance.
  • There is a limit of $4,950 for an individual employee or $10,000 if an employer wants to pay for a staffer’s family’s expenses. The law provides for annual increases tied to the inflation rate.

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