Tag Archives: Tax Deduction

Tax breaks when your New Hampshire Business meets disaster

Most small business owners are simply not prepared if disaster were to strike their business, whether it’s in New Hampshire or elsewhere. At least there are some tax breaks if disaster does strike, and that’s what we’ll discuss here.

 

Small businesses are particularly vulnerable to the effects of a catastrophic event such as a fire, flood, tornado, most recently landslides, or other natural disaster.  While business casualty and other types of insurance coverage are available, there will still be other losses that are not recoverable and leave your business facing a deficit.

 

Casualty covers a range of sudden, expected or unusual loss due to damage of property.  Some typical events can include natural disasters like hurricanes, as well as acts of vandalism, theft, car accidents and embezzlement. Events that are not deductible include deterioration due to age, weather, termites and drought.  Like any part of the tax code, there are a few exceptions including when a drought may be considered a casualty if the property damaged was used for a trade or business, or in a transaction for profit such as an investment in farmland,

 

Business inventory losses can be treated a few different ways.  According to IRS Publication 584-B – Business Casualty, Disaster, and Theft Loss Workbook, the loss can be considered as a casualty loss described above.  Conversely, the loss can be treated as part of the business’ goods sold. The loss against goods sold may help to reduce the business’ net income thereby reducing the amount of Self-Employment Contributions Act (SECA) taxes paid.

 

 

If the property was a total loss, then the value of the loss will depend on whether it was a business or personal property. If it was a business property, the calculation used must take the adjusted tax basis after the loss, minus any salvage value received. You’ll notice that FMV doesn’t come into the equation at all. Additionally, if more than one item was damaged by the casualty, each item must be calculated separately in order to take the deduction.

 

 

Once the calculations are done, be prepared to prove that your losses are: a) real (i.e. that you suffered a legitimate and provable loss), b) you had actual possession of the property, and c) any lack or insufficiency of reimbursement (typically by the insurance company) to cover the loss.  That means that you’ll want to keep receipts and considering that casualty usually involves some type of catastrophic event like a hurricane, keeping a digital off-site copy of receipts ‘in the cloud’ is a great way to ensure that you’ll still have a safe, legal paper trail well after the event. Acceptable proof of theft can include witness reports from those who saw your property taken, police reports, and even newspaper accounts of the event. 

 

 

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Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in helping small business owners with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

NH Small Business Owners Brace Yourself…Let’s talk Taxes in 2014

We have plenty of tax issues and challenges to reducing our taxes coming in 2014, particularly if you are a higher income taxpayer.

 

The following issues are concerns that may impact you and your company’s tax liability in the new year.

  • Small Business Health Insurance Credit – The tax credit to small employers (25 or fewer equivalent full-time employees) that provide an affordable health insurance plan for their employees and supplement at least half the premiums, will increase to 50% of the employer’s contribution in 2014, up from 35% in 2013. For non-profit employers, the credit will be 35% in 2014.

 

  • Net Investment Income Tax – As part of the Patient Protection & Affordable Care Act (the new health care legislation sometimes referred to as “Obamacare”), a new tax kicked in for 2013 and will continue in 2014 and beyond. It is a surtax levied on the net investment income of taxpayers in the higher-income brackets. And although it is perceived as an additional tax on higher-income taxpayers, it can affect even those who normally don’t have higher income if they have a large income from the sale of real estate, certain business assets, stocks, or other investments. This is on top of the 20% long-term capital gain tax rate now in effect for higher-income taxpayers.

 

  • Higher Tax Rates – Prior to the increase in 2013, there were six tax brackets: 10, 15, 25, 28, 33, and 35%. Beginning in 2013 and continuing for future years, a new top rate of 39.6% has been added for higher-income taxpayers.

 

  • Higher Capital Gains Rates – Beginning in 2013 and continuing for future years, the tax rate for long-term capital gains and qualified dividends has been increased to 20% (up from 15%) for taxpayers with incomes exceeding the threshold for their filing status.

 

  • Medical Adjusted Gross Income (AGI) Phase-out – Beginning in 2013 and continuing for future years, a taxpayer’s medical deductions will be reduced by 10% of their AGI, up from the previous 7.5% (but the 7.5% continues to apply to seniors through 2016).

 

  • Possibility of Lower Expensing Deductions – The Sec 179 business expensing allowance for business equipment drops from $500,000 per year to $25,000 in 2014 unless Congress extends the more liberal amount.(1)

 

  • Bonus Depreciation Expires – Beginning in 2014, the 50% bonus depreciation for tangible business assets will expire unless Congress extends it.(1) This also reduces the first-year maximum depreciation deduction for business autos and small trucks.

 

  • Individual Insurance Mandate – Beginning in 2014, the Patient Protection & Affordable Care Act will impose the new requirement that U.S. persons, with certain exceptions, have minimum essential health care insurance, or face a penalty.

 

  • Large Employer Mandatory Insurance Requirement – Originally scheduled to begin in 2014 but delayed until 2015 because the government did not have the reporting mechanisms in place, large employers, generally those with 50 or more full-time equivalent employees in the prior calendar year.

 

  • Simplified Home Office Deduction – Effective for tax years beginning in 2013 and continuing for 2014 and beyond, taxpayers can elect a simplified deduction for the business use of the taxpayer’s home. The deduction is $5 per square foot with a maximum square footage of 300. Thus, the maximum deduction is $1,500 per year. Eligibility qualifications are the same whether the simplified or regular deduction is claimed.

 

  • Increased Payroll and Self-Employment Tax – As part of the new health care legislation, higher-income taxpayers are faced with an additional 0.9% health insurance (HI) tax. Starting in 2013, and continuing for future years, this surtax is imposed upon wage earners and self-employed taxpayers whose wage and self-employment income exceeds $250,000 for married taxpayers filing jointly ($125,000 if filing separately) and $200,000 for all others.

 

  • Pease Limitations – The Pease limitation on itemized deductions that was reinstated in 2013 will continue for 2014. The Pease limitation phases out certain itemized deductions for higher-income taxpayers.

 

  • Phase-out of Exemptions – The phase-out of exemptions for higher-income taxpayers that was reinstated in 2013 continues for 2014.

 

  • Longer Depreciation Life for Leasehold and Restaurant Property – The current 15-year depreciable life will increase to 39 years in 2014.(1).

 

  • Qualified Small Business Stock Gain Exclusion – Beginning for qualified small business stock issued in 2014, the gain exclusion drops from 100% to 50%

 

  • Qualified Real Property Expensing – Congress temporarily permitted the use of the Sec 179 expensing deduction to write off certain leasehold improvements, and restaurant and retail property improvements. Without Congressional intervention, this provision will no longer be available in 2014.

 

(1) Congress, a few years back, engaged in brinkmanship with last-minute tax changes. Normally, they have managed to finalize tax law by year’s end. However, for 2013, they adjourned without addressing the issue of extending many tax breaks that were set to expire at the end of 2013. It is not known if these tax provisions will be extended or not.

 

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.

New IRS Vehicle Mileage Rates out for 2014

It’s not often that we see the price of something go down, but the IRS has determined that it’s now costing us less to operate our cars, and so now we will start getting less to deduct when we use it for business.

 

Beginning on Jan. 1, 2014, the IRS Vehicle mileage rates for the use of a car (also vans, pickups or panel trucks) will be 56 cents per mile for business miles driven.

 

The rates decrease one-half cent from the 2013 rates. If you’re reimbursing employees based on the IRS rate, take note of this for the beginning of next year.

If you found this article useful, please do not keep this a secret. Share it with a friend.

 

Copyright 2014 by Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, a PASBA member accountant, located in Londonderry, New Hampshire, with more than twenty- five years experience on Federal and New Hampshire issues affecting small business, and specializes in keeping his clients OnTrack with bookkeeping, tax, and payroll services for a fixed monthly fee. Learn more about Steve’s exclusive SIX Step system developed for small businesses at www.appletreebusiness.com/map.