Find Tax Breaks For Your Biz
Q: Are there any tax breaks for small businesses? If so, what are they?
A: As Florida has no state income tax, any tax advantages for Florida small business owners would be on the federal level, according to Lynn Schmidt, a tax practitioner with Lynco Financial and Tax Services in Winter Haven, Fla.
Federally speaking, there are a wide variety of tax benefits for small businesses. Many depend on the type of business you own, says Tom Ochsenschlager, vice president of taxation at the American Institute of CPAs.
One of the most fundamental, but dramatic, is available to LLCs and corporations with S-status.
“If they’re eligible, they only pay tax at the shareholder/owner level, as opposed to paying at the corporate level and again at the shareholder level to the extent that there are dividends distributed,” Ochsenschlager said. “This way they avoid a double tax.”
An often-overlooked tax benefit unique to small businesses, regardless of whether they are a corporation, partnership, or sole proprietorship, is Section 179 small business expensing, says Vicki Meyer, CPA, of Counsel Thomas Howell Ferguson PA in Tallahassee, Fla.
“This benefit was recently liberalized by the 2007 Small Business Act. In general, it allows a business to take a current deduction up to $125,000 for the cost of assets placed in service during the year for use in the business, not including real estate,” she says.
Without this benefit, the business owner would need to capitalize the asset and deduct the cost over many years through a depreciation deduction. For example: if a small business purchased a copy machine for $2,000, the entire amount could be deductible in the first year. A larger business would be required to deduct the cost over five years, which is what the IRS considers the life of the asset, according to Meyer.
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Photo by larealestateblog.net.
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