Key Takeaways
- The healthcare tax credit can benefit small businesses that employ fewer than 10 full-time-equivalent employees with average wages under $25,000 per person.
- The healthcare tax credit can be carried forward if not used in the current year.
- Bonus depreciation allows for 80% expensing of assets that are new or used for tax year 2023, 60% for 2024, 40% for 2025, and 20% for 2026.
- After 2026 there is no further bonus depreciation.
Carry forward the health credit
The healthcare tax credit is offered on a sliding scale. Businesses that employ fewer than 10 full-time-equivalent employees with average wages under $25,000 per person get the most benefit. To claim the credit, use form 8941 to calculate your eligibility. If your business did not owe taxes in that year, you may be able to carry the credit forward. If a remainder of the tax premium exists, you can claim business expenses against it.
TurboTax Tip:
Taxpayers can make an election to opt-out of new bonus depreciation rules and use 50% first-year depreciation per the previous rules.
Deduct section 179 property
Small businesses can opt to deduct the full amount of certain property as expenses in the year the business began using them. This is referred to as section 179 property and can include up to $1,220,000 of eligible business property in the 2024 tax year. Some eligible deductions include:
- property used in manufacturing, transportation and production
- any type of facility used for business or research
- buildings used to hold livestock or horticultural products
- off-the-shelf computer software
Excluded:
- land
- investment property
- land outside of the U.S.
- buildings that provide lodging
- buildings that are used to store air conditioning or heating units
Bonus Depreciation: Bonus depreciation has been changed for qualified assets acquired and placed in service after September 27, 2017. The old rules of 50% bonus depreciation still apply for qualified assets acquired before September 28, 2017. These assets had to be purchased new, not used. The new rules allow for 100% bonus "expensing" of assets that are new or used. The percentage of bonus depreciation phases down in 2023 to 80%, 2024 to 60%, 2025 to 40%, and 2026 to 20%. After 2026 there is no further bonus depreciation. This bonus "expensing" should not be confused with expensing under Code Section 179 which has entirely separate rules, see above.
The 100% expensing is also available for certain productions (qualified film, television, and live staged performances) and certain fruit or nuts planted or grafted after September 27, 2017.
Taxpayers can make an election to opt out of the new bonus depreciation rules and use 50% bonus first year depreciation per the prior rules for the first tax year ending after September 27, 2017.
TurboTax can assist you in choosing what types of property are appropriate deductibles.
Deduct appreciable stock contributions
Many small businesses make charity contributions throughout the year and deduct the amount that’s donated. Ayoub suggests a way to maximize these contributions. “Donate appreciable stocks instead of money,” he advises. “Your business can deduct the current worth of the stock at the time of contributing, as opposed to what the stock was originally purchased (for).” For example, if you donate one share of a stock that you bought a year ago for $50 per share, and that stock is now worth $100 per share, you can deduct $100 at tax time. This gives you a deduction of the $50 you paid for the share plus the additional $50 that the share appreciated.
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