The IRS has several dozen federal tax breaks are scheduled to go away at the end of the year, unless Congress decides to keep them alive. Business owners in the U.S. Virgin Islands would be well advised to investigate these expiring tax rules and take advantage of them now.
Some of the key expiring tax breaks include:
Accelerated write-off for buying needed equipment
If you are contemplating any technology upgrades in your business, there are two ways to more readily deduct your costs in 2013, rather than depreciating the costs over the next several years:
* You are currently permitted to deduct up to $500,000 of the cost of qualified equipment (either new or used) in 2013 provided your business turns a profit. This deduction limit is set to be reduced to $25,000 next year; and
* You can deduct 50% of the cost of new qualified equipment, even if it adds to or creates a business loss. This deduction is scheduled to be eliminated completely in 2014.
Either of these options may be leveraged to break even if you finance even part of your purchase. If you will spend more than $25,000 on business use property in 2014, then make those purchases before the end of the year.
Accelerated write-offs for improving your facilities
The costs of capital improvements to your workspace typically can only be depreciated over a period of 39 years. However, for improvements to leaseholds (by the lessor, lessee, or sub-leasee), restaurants, and retail establishments, you can use one or all of three of the following rules as long as the improvements are completed before the end of this year:
* $250,000 first-year expensing for eligible improvements;
* 50% bonus depreciation for eligible improvements; and
* 15-year amortization period for any costs not deducted with first-year expensing or bonus depreciation.
Tax credits available for hiring certain workers
If your business is planning to expand and you need additional employees on the payroll and have projected the cost of hiring after factoring in future health care obligations, one consideration is hiring from certain targeted groups which may entitle your business to a tax break that can be used to offset your tax bill:
* There is a work opportunity credit for hiring certain disadvantaged workers, including certain veterans;
* An Indian employment credit is available if you hire an enrolled member, or spouse of an enrolled member, of an Indian tribe who performs services within an Indian reservation; and
* Empowerment employment credit is also an option if your business is located within a federally-designated empowerment zone.
The amount of each credit and eligibility rules vary, but each requires that the employer to hire an eligible employee before the end of 2013.
The American Institute of CPA’s (AICPA) and the Congressional Joint Committee on Taxation report that there are 55 tax provisions expiring in 2013. Some will be extended. Speak with Attorney Steven K. Hardy in the Corporate, Tax and Estate Planning Practice Group at BoltNagi about your business organization and plans for its future. Attorney Hardy is primarily focused on representing clients in small business formation & structuring, real estate & financing, and probate & estate planning.
At BoltNagi, we work to help businesses in the U.S. Virgin Islands meet their goals. It’s an attitude toward providing legal services that our new clients appreciate – and that our current clients have come to expect.