2016 Year-End Planning for Businesses

Year-end planning for businesses is particularly important this year given the large number of recent tax law changes that offer new tax savings opportunities, in addition to the “time-tested” tax savings techniques that continue to apply. It seems every year we are faced with a long list of business tax breaks that have either recently expired, or are scheduled to expire in the near future. Fortunately, the Protecting Americans From Tax Hikes Act Of 2015 (the PATH Act) has made many (but not all) of these business tax breaks permanent. For example, the following tax breaks that were previously scheduled to expire are now permanent: Expanded Section 179 deduction; 15‑year (instead of 39‑year) depreciation period for “qualified” leasehold improvement property, retail improvement property, and restaurant property; Research and experimentation credit; 5‑year (instead of 10‑year) waiting period for an S Corporation to avoid the built‑in gains tax; 100% exclusion of gain on the sale of qualified small business stock for both regular tax and AMT purposes.

The PATH Act also extends several business tax breaks through 2019, including: The 30% Business Credit for Certain Solar Energy Property (the credit begins phasing out after 2019); The $8,000 Increase in the First-Year Depreciation Deduction Limitation for Qualifying New Passenger Vehicles which Begins Phasing Out after 2017 and phases out completely after 2019; The Work Opportunity Credit (WOTC) For Hiring Workers from Certain Targeted Groups (the PATH Act also added a new group of qualifying workers – “Qualified Long-term Unemployment Recipients”). In addition, (as discussed in more detail later), the PATH Act extends and expands the 50% 168(k) Bonus Depreciation Deduction through 2017.