Standard Mileage Rates
The rate for business miles driven is 54 cents per mile for 2016, down from 57.5 cents per mile in 2015.
Section 179 Expensing
The Section 179 expense deduction was made permanent at $500,000 by the Protecting Americans from Tax Hikes Act of 2015 (PATH). For equipment purchases, the maximum deduction is $500,000 of the first $2 million of qualifying equipment placed in service during the current tax year. The deduction is phased out dollar for dollar on amounts exceeding the $2 million threshold amount and eliminated above amounts exceeding $2.5 million. In addition, Section 179 is now indexed to inflation in increments of $10,000 for future tax years.
The 50% bonus depreciation has been extended through 2019. Businesses are able to depreciate 50% of the cost of equipment acquired and placed in service during 2015, 2016, and 2017; however, the bonus depreciation is reduced to 40% in 2018 and 30% in 2019.
Work Opportunity Tax Credit (WOTC)
Extended through 2019, the Work Opportunity Tax Credit has been modified and enhanced for employers that hire long-term unemployed individuals (unemployed for 27 weeks or more), and is generally equal to 40% of the first $6,000 of wages paid to a new hire.
Research & Development Tax Credit
Starting in 2016, businesses with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.
Employee Health Insurance Expenses
For taxable years beginning in 2016, the dollar amount is $25,900. This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.
Employer-Provided Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees, in 2016, the maximum monthly limitation for transportation in a commuter highway vehicle, as well as any transit pass, is $255. The monthly limitation for qualified parking is $255 (up $5 from 2015). Parity for employer-provided mass transit and parking benefits was made permanent by PATH.
While this checklist outlines important tax changes for 2016, additional changes in tax law are more than likely to arise during the year ahead. –Jeff Bronswick, Bronswick Reicin Pollack
Image by: Stuart Miles