It seems we are in an era of increased complexity and rising rates when it comes to taxes and small business. As a result, it becomes even more essential that business owners stay on top of tax law changes so that you can plan and develop strategies to minimize your tax liability. There is an extensive list of recent tax changes that may impact Arizona small business owners. Today I’ll cover some of the most important changes and those most likely to impact  small businesses and around the country.

Arizona small business strategies

There were some tax rates and rule changes that hit in 2013, and most were carried forward into this year, 2014. If you are a new business owner, or you have or will have significant events that could impact your tax status – you’ll want to review the list below to make sure you’ve got the best strategies in place for your particular business and situation.

  1. Net Investment Income Tax – A surtax levied on the net investment income of taxpayers in the higher-income brackets was instituted in 2013 as part of the Affordable Care Act, otherwise known as Obamacare. Even if you are not in the higher-income brackets, you may be impacted by this surtax if you have a spike in income as a result of a special event such as the sale of real estate, certain business assets, stocks, or other investments. This surtax is on top of the 20% long-term capital gain tax rate now in effect for higher-income taxpayers.
  2. Reduced Expensing Deductions – If you have used or were planning to use the Sec 179 business expensing allowance for business equipment, you could see a significant reduction in the amount allowed. The maximum deduction could drop from $500,000 per year to $25,000 in 2014. There is hope that Congress will extend the more liberal amount, but I wouldn’t count on it. Stay tuned on this one.
  3. Qualified Real Property Expensing – The ability to write off qualified leasehold improvements and restaurant and retail property improvements under Sec 179 may go away in 2014. Congress had temporarily permitted the use of the Sec 179 for these expenses, but it will no longer be available unless Congress acts to extend this provision. Another one to stay tuned on.
  4. Home Office Deduction – If you operate your Arizona small business out of your home some or all of the time, like many entrepreneurs in the Phoenix area, do these days, a new simplified home office deduction method is available. The deduction is $5 per square foot with a maximum square footage of 300. The maximum deduction is $1,500 per year. Eligibility qualifications for taking this deduction have not changed.
  5. Longer Depreciation Life for Leasehold and Restaurant Property – The depreciable life will increase from 15-years to 39 years in 2014.

For more tax information resources, visit my Tax Information page.

Randy Randy J. Elder, CPA, P.C.

With nearly three decades of professional experience in public accounting, Randy provides his tax and accounting expertise to new and small businesses in a casual and friendly environment. Before founding Randy J. Elder, CPA, P.C., he held various positions with an international accounting firm, and with regional and local CPA firms. Randy earned his Arizona CPA license in 1988, and holds a Bachelor of Science degree in Accountancy from Northern Arizona University.

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