Tax time is one of the least-liked seasons for business owners, especially if you can’t afford the armies of accountants that help save larger companies a bundle. And it’s getting more complicated every year, even for the experts, thanks to the mounting gridlock in Washington. Congress waited until December–almost a full year after many bits of tax code had expired at the end of 2013–to take up the issue of retroactively renewing these so-called tax extenders. Since several of these deductions and credits benefit small businesses, this delay means you’re probably facing a lot of last-minute scrambling to figure out how much you owe; even your tax software or accountant may be perplexed.
But all of that scrambling could be worth it. If you pay attention to the fine print, you could have reasons to celebrate this spring–tens of thousands of dollars’ worth of reasons, in some cases. Between the tax extenders and incentives from the health care overhaul, look for several other tax breaks coming out of Washington that could help your business this season. Make sure you don’t overlook these credits and deductions for your business taxes.
1. Boost employee benefits
Yes, they can be expensive at first. But if you pay for employee health insurance, give transit benefits, or offer a 401(k) matching contribution, you can write off those costs. For 2014, some small businesses can also qualify for a special health insurance credit, of up to 50 percent of what they paid for employee health insurance premiums if those plans were purchased through the exchanges. That credit is an incentive tied to the Affordable Care Act, intended to increase health insurance coverage by lowering the cost of offering it. But it’s a limited-time offer for small businesses–good for two years, max.
2. Donate excess inventory
Donations in kind never go out of style–giving away your unwanted merchandise can help others while alleviating your tax bill. In-kind clearinghouses like Good360 and NAEIR make it easy to get unwanted merchandise off your hands and to the people or nonprofits that need it most. The tax rules are more favorable for C corporations, which can generally write off larger amounts for donated items than the owners of S corporations and partnerships can. If you missed the boat in 2014, plan ahead: Make any donations by the end of this year to claim them next tax season.
3. Help local economies
There has long been a patchwork of incentives for doing business in troubled cities (think Detroit; Baltimore; Gary, Indiana) and needy rural areas. If you’re located in a federally designated empowerment zone, check out the tax benefits. The main one, assuming the rules are extended, is a wage credit for hiring employees who live in such zones. But make sure the credit is worth the time it takes to slog through the paperwork, especially if you’re doing it on your own. Still, for up to $3,000 per employee in those zones, sometimes it’s worth it to jump through the hoops.
Extra Specials for Brand-New Startups
If your business launched last year, make sure you take startup-cost deductions. The game starts as soon as you have an idea. Even before opening the doors, you’ll probably spend on market research or travel to meet potential customers. Under the tax rules, you can expense up to $5,000 of those costs and amortize the rest over 15 years–a much better deal than the standard tax treatment.