Summary of Business Tax Law Changes 2010-2017
Learn how federal tax law changes could impact your small business returns this year, and in the future. Here is a summary of all business tax law changes between 2010 - 2017.
The article below is accurate for your 2017 taxes including a few retroactive changes due to the passing of The Tax Cut and Jobs Act. Some tax information below will change for your 2018 taxes, but won’t impact your 2017 taxes. Learn more about tax reform here.
Many of the breaks in recent tax relief bills are designed to be phased in over a number of years. To help you determine how these tax laws might affect your long-term plans, we'll explain the changes that come into effect through 2017. With more tax law changes enacted by Congress at the end of 2010, check TurboTax regularly for updates. Select a year to see what tax changes will affect that year's returns.
Starting in 2010
Payroll Tax Credit
For 2009 and 2010, Congress gave workers a credit of 6.2% of their earned income, capped at $400 for single filers and $800 for joint filers. For single filers, it starts phasing out at $75,000 of Adjusted Gross Income and dries up at $95,000. The phaseout zone for couples is $150,000 to $190,000. While employees get the credit in advance via lower income tax withholding in each paycheck, self-employeds can reduce their quarterly estimated payments to get an advance benefit from the credit. The exact amount of the payroll tax credit for the year will be calculated on the filers’ tax returns
Self-Employment Tax Contribution Base Unchanged
The maximum amount of self-employment income subject to Social Security taxes remains at $106,800 in 2010, unchanged from 2009. The self-employment tax rate remains 15.3%.
Social Security Tax Contribution Base Unchanged
The maximum amount of wages subject to Social Security tax remains at $106,800. The tax rate remains 7.65% on employers and employees.
Business Standard Mileage Rate Drops
The standard business mileage rate is 50 cents per mile, down 5 cents per mile from the allowance that applied for business driving in 2009. Remember that you can deduct the cost of parking and tolls in addition to the mileage allowance.
Tax-Free Parking for Employees
Companies can pay for $230 a month of parking tax-free for employees, unchanged from 2009. The cap on tax-free transit passes is now $230 a month as well, the same as for parking.
Bonus First-Year Depreciation
The first-year depreciation bonus that businesses can take on new assets put in use was increased to 100% from 50% for qualified investments made after September 8, 2010, through the end of 2011. In other words, they can write off the entire cost of the asset up front. Smaller firms can first claim expensing and then use the 100% bonus. If you buy used assets, no 100% write-off is allowed.
Assets depreciated over 20 years or less are eligible, including machinery, equipment, land improvements and farm buildings, even leasehold improvements made to the interior of commercial realty. But this special write-off is not available for other buildings. Autos and light trucks also benefit if they are used for business. The maximum first-year write-off for them remains at $11,060. However, this is only for vehicles that are put in service during 2010.
Carrybacks of Net Operating Losses
Businesses with average annual gross receipts can carry back net operating losses from the 2008 and 2009 tax years for a maximum of five tax years. The carryback period is usually two years.
Estimated Tax Relief for Owners of Small Businesses
If an individual’s Adjusted Gross Income for 2009 was less than $500,000, and more than half of gross income was from a business with fewer than 500 workers, the owner’s estimated income taxes for 2010 estimated payments can be based on the lesser of 90% of tax liability for 2010 or 100% of the liability for 2009. The usual estimated tax benchmarks of 100% or 110% of tax liability do not apply.
Wind Energy Credit
The $4,000 annual ceiling on a business tax credit for wind energy turbines was repealed. The credit is for 30% of the cost of wind energy turbines of 100 kilowatts or less.
Higher Section 179 Expense Deduction
The maximum amount of equipment placed in service in 2010 that businesses can expense was raised to $500,000 by the Small Business Jobs Act of 2010, an increase of $250,000 over the maximum for 2009. The annual investment limit was raised to $2 million for 2010. Thus, you won't begin to lose the benefit of expensing until you place more than $2 million of assets in service in 2010.
Domestic Production Activities Deduction
Starting in 2010, this deduction increases to 9% of qualifying business net income from domestic production activities. This deduction applies to businesses engaged in construction, engineering or architectural services; film production; or the lease, rental or sale of equipment manufactured in the United States. However, the rate remains at 6% for oil and gas companies.
The R & D Tax Credit
The credit for increasing spending on research and development was extended through the end of 2011.
Limits on Deducting Farm Losses
Beginning in 2010, the amount of farm losses you can enter to offset nonfarm income is capped at the greater of $300,000 or your net farm income over the past five years. But this limit will apply only if you get federal farm payments or Commodity Credit Corporation (CCC) loans. You can take suspended losses in later years. The caps will also apply to partners and S firm owners.
Starting in 2011
Self-Employment Tax Reduced
The self-employment tax rate is reduced to 10.4% from 15.3% for 2011 and 2012.
Social Security Tax Reduced for Employees
The maximum amount of wages subject to Social Security tax remains at $106,800. However, the tax rate on employees for 2011 is reduced to 4.2% from 6.2% while the tax rate on employers remains at 6.2%.
Payroll Tax Credit
The credit of 6.2% of earned income, capped at $400 for single filers and $800 for joint filers, no longer applies.
Increased Section 179 Expense Deduction
The maximum amount of newly-purchased assets that a business is allowed to expense remains at $500,000 through 2014. The annual investment limit through 2014 remains at $2 million.
Starting in 2012
Social Security Tax Reduced for Employees
The maximum amount of wages subject to Social Security tax increases to $110,100 in 2012. The tax rate on employees for 2012 remains temporarily reduced to 4.2% from 6.2% while the tax rate on employers remains at 6.2%.
Withholding on Government Contracts
Starting in 2012, amounts paid out under government contracts will be subject to 3% tax withholding. This will affect contracts with the federal government, state governments and any municipality that pays out $100 million or more on contracts a year. Interest and payments for real estate are exempted.
Reduced Section 179 Expense Deduction
The maximum amount of newly-purchased assets that a business is allowed to expense is reduced to $139,000 for 2012. The annual investment limit is reduced to $560,000 for 2012.
Starting in 2013
Self-Employment Tax Contribution Base Increases
The maximum amount of self-employment income subject to Social Security taxes increases to $113,700 in 2013, up from $110,100 in 2012. The self-employment tax rate goes back to 15.3%.
Social Security Tax Contribution Base Increases
The maximum amount of wages subject to Social Security tax increases to $113,700 in 2013, up from $110,100 in 2012. The tax rate goes back to 7.65% on employers and employees.
Business Standard Mileage Rate Increases
The standard business mileage rate is 56.5 cents per mile, up 1 cent per mile from the allowance that applied for business driving in 2012. Remember that you can deduct the cost of parking and tolls in addition to the mileage allowance.
Tax-Free Parking for Employees
Companies can pay for $245 a month of parking tax-free for employees. The cap on tax-free transit passes is also $245 a month as well, the same as for parking.
Incomes Taxes Will Go Up For Some in 2013
Medicare Taxes Will Go Up For Some in 2013
Starting in 2013 employers must withhold an additional .9% in Medicare tax from the checks of employees earning more than $200,000 per year.
Easier Home Office Deduction Option
Starting in 2014
Social Security Tax Contribution Base Increases
The maximum amount of wages subject to Social Security tax increases to $117,000 in 2014, up from $113,700 in 2013.
Business Standard Mileage Rate Decreases
The standard business mileage rate is 56 cents per mile, down 0.5 cent per mile from the allowance that applied for business driving in 2013. Remember that you can deduct the cost of parking and tolls in addition to the mileage allowance.
Starting in 2015
Social Security Tax Contribution Base Increases
The maximum amount of wages subject to Social Security tax increases to $118,500 in 2015, up from $117,000 in 2014.
Business Standard Mileage Rate Increases
The standard business mileage rate is 57.5 cents per mile, up 1.5 cent per mile from the allowance that applied for business driving in 2014. Remember that you can deduct the cost of parking and tolls in addition to the mileage allowance.
Tax-Free Parking for Employees
Companies can pay for $250 a month of parking tax-free for employees. The cap on tax-free transit passes is also $250 a month as well, the same as for parking.
Section 179 Expense Deduction
The maximum amount of newly-purchased assets that a business is allowed to expense is made permanent at $500,000 for 2015 and beyond. The annual investment limit is reduced to $2,000,000 for 2015 and beyond.
Bonus Depreciation Extended through 2019 With Phase-Out
Bonus depreciation of 50% is available for 2015 through 2017. This reduces to 40% in 2018 and 30% in 2019.
Starting in 2016
Social Security Tax Contribution Base Increases
The maximum amount of wages subject to Social Security tax stays at $118,500 in 2016, with no change from 2015.
Business Standard Mileage Rate Increases
The standard business mileage rate is 54 cents per mile, down from 57.5 cent per mile that applied for business driving in 2015. Remember that you can deduct the cost of parking and tolls in addition to the mileage allowance.
Tax-Free Parking for Employees
Companies can pay for $255 a month of parking, transit, and commuter highway vehicles tax-free for employees. This is up from $250 for 2015.
Starting in 2017
Solar Heating Credit
The 30% tax credit on the cost of certain solar units continues through 2019. The percentage reduces from 2020 through 2022 when it stabilizes at 10%.
Social Security Tax Contribution Base Increases
The maximum amount of wages subject to Social Security tax increases to $127,200 in 2017.
Business Standard Mileage Rate Increases
The standard business mileage rate is 53.5 cents per mile, down from 54 cents per mile that applied for business driving in 2017. Remember that you can deduct the cost of parking and tolls in addition to the mileage allowance.
Tax-Free Parking for Employees
Companies can pay for $255 a month of parking, transit, and commuter highway vehicles tax-free for employees.
Health Care Flexible Spending Accounts
Employees can contribute up to $2,600 to Qualified Health Care Spending Accounts in 2017.
Accelerated Due Dates for Informational Returns (W-2s, 1099s, etc.)
Beginning in 2017, Forms W-2, W-3 and 1099-MISC must be filed by January 31st of the following year to which they apply. There is no longer an extension of time to file for electronically filed returns.
Partnerships and S-Corporations Filing Deadlines
Both Partnerships and S-Corporations must file their returns by the 15th day of the third month after the end of their tax year. For calendar year tax filers this is now March 15th.
C Corporations Filing Deadlines
C Corporations must file their returns by the 15th day of the fourth month after the end of their tax year. For calendar year tax filers this is now April 15th. However, C Corporations with fiscal years ending on June 30th, the filing deadline continues to be the 15th day of the third month after the end of their tax year.
Section 179 Depreciation
For assets placed in service in the 2017 tax year, you can take a maximum Section 179 deduction of $510,000. The amount you can expense is reduced if you purchase more than $2,030,000 in eligible property during the year.
Bonus Depreciation
Bonus depreciation has been changed for qualified assets acquired and placed in service after September 27, 2017. The old rules from 2015 still apply for qualified assets acquired before September 28, 2017. 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.
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.
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