In 2015, Congress passed the most recent version of a bill for Protecting Americans Against Tax Hikes (PATH Act). Primarily known as tax extender bills, PATH Acts are generally used to extend tax credits and make other changes to the tax code, for both individuals and businesses. While many may have questions about the PATH Act in general, these provisions listed below pertain to small business owners and focus on how the PATH Act may affect your business.
New Deadline for Submitting W-2s and 1099 MISC Forms
Before 2017, the deadline for businesses to submit W-2s and 1099 MISC forms to employees was the end of February. Starting in 2017 — applicable to 2016 taxes — businesses are required to submit these documents by January 31. This is a full month earlier than before.
Higher Expensing Limitations
The 2015 PATH Act extended indefinitely the higher amounts small businesses can expense for tangible property, as per Section 179. Small businesses can now expense up to $500,000 in tangible business property, with a total cap of $2 million.
Qualifying tangible property includes:
- Computer software
- Office equipment
- Office furniture
- Air conditioning and heating units installed after 2015
This provision does not apply to real estate, property obtained by gift or inheritance, or property used outside the United States. The property must also be bought and set up for use before the end of the tax year in which the expense will be claimed.
Deduction for Energy Efficient Commercial Buildings
For business owners who own commercial property, the 2016 PATH Act extended the deduction for commercial buildings that meet specific energy-efficient standards.
The 179D deduction aims to increase energy efficiency in new and remodeled buildings. The deduction came into being as part of the Energy Policy Act of 2005.
To claim provision 179D, a commercial building must save the cost of 50 percent of energy and power costs related to interior lighting, heating, cooling and ventilation, and hot water systems.
Provision 179D allows a $1.80 deduction per square foot. Partial deductions (60 cents per foot) are also available for buildings with specific systems that are proved energy-efficient, even if the entire building is not. The deduction is currently set to expire after 2016 but can still be claimed for 2016 taxes for buildings put into service after December 31, 2005.
Wage Credit for Employing Active Duty Military
Beginning in 2016, businesses of any size can claim a tax credit for employing an active duty member of the U.S. military. Previously, only businesses with 50 or more employees were eligible. The 2015 PATH Act extended the provision indefinitely, giving employers a 20 percent wage credit for hiring men and women who have served.
WOTC (Work Opportunity Tax Credit) for the Previously Unemployed
The WOTC gives employers a tax credit for hiring new employees who were previously out of work for 27 weeks or longer. Starting in 2016, this credit increased to 60 percent of the first $6,000 of the employee’s wages.
In general, most charitable donations must be claimed on personal tax returns instead of through the business. However, the 2015 PATH Act extended a provision allowing non-corporate businesses to deduct the cost of wholesale food donations made to charity.
The PATH Act also allows corporations to deduct charitable contributions of up to 10 percent of their taxable income.
For more information about the PATH Act, contact Liberty Tax directly at 1-877-at-Liberty, or visit a conveniently located Liberty Tax office near you. For updates on all things taxes, follow Liberty Tax on Facebook and Twitter.