Small Business Tax Breaks for 2017: Economic Stimulus Package Tangible Asset Investment Tax Cuts

Small Business Tax Breaks for 2017

When Bush signed his economic stimulus package, one of the little known provisions was an increase in the depreciation ceiling on the amount of money that businesses can deduct in a single year. This is a one time tax code change for 2017. The ceiling has been raised to $250,000 for equipment, furniture, computer equipment, and etc. purchased in 2017. The amount was raised from the scheduled $128,000 for 2017. It is expected to return to this level in 2018.

However businesses should be careful, companies with more than $800,000 in qualifying assets purchases are not eligible for the increased depreciation write off in 2017.

Eligible businesses include sole proprietorships, partnerships, and corporations

Depreciation Tax Breaks

Congress threw in an additional provision that small businesses can take advantage; they can depreciate 50 % of the value of a specific asset in the first year in 2017. This is up from the typical 20 % and is referred to as the “bonus depreciation.”

For example, if a company claims the full $250,000 deduction in 2017, the bonus depreciation only applies to qualifying purchases after the one time deduction is taken. So if your company purchases $350,000, the first $250,000 is eligible for the one time depreciation deduction. Then $50,000 can be counted as depreciable expenses on the remaining $100,000 – bonus depreciation. The $50,000 is higher than the $20,000 that would normally be depreciated.

Eligible properties that can be used for this deduction include machinery and equipment (vehicles over 6,000 lbs), furniture and fixtures, and most storage facilities. Examples can include other vehicles and computers.

New Tax Breaks Benefits

Unless you have other sources of income other than your business income, your taxable loss can not exceed your income. If taxable exceeds business income, you can take advantage of more of the taxable loss by combining your company earnings with those of your spouse or money earned other than through your business. For example:

  • You were someone else’s employee for part of the year
  • You spouse works and make more income than you do during the year
  • You are in partnership with someone in another venture and you can claim your income from that partnership

Small Business Tax Breaks Summary

This is an excellent opportunity for a business to fully depreciate eligible expenses this year instead of over 5 years. You should also be aware of less obvious advantages of the one time deprecation deduction:

  • Lowers adjusted gross income
  • Lowers earned income, which may increase your earned income credit
  • Allowed in full, even if the eligible property is placed in service on the last day of the year
  • Companies who choose to acquire assets through a finance lease may depreciate the asset in the same way they would if they had purchased it outright.
  • If eligible property is delivered this year, the deduction can be made this year with just one month cash outlay

Money to Build Your Small Business

 

Money to Build Your Small Business

The SBIC program purposes to provide creative and flexible loan options to small and newly established businesses. SBICs, or Small Business Investment Companies, have been providing capital to qualified small businesses since 1959, according to the Small Business Association. The SBIC is a privately owned investment fund licensed by the SBA to provide debt or equity financial assistance and management consulting to small businesses that meet preset conditions.

The SBIC program is strikingly different than applying for a loan through a traditional commercial bank. This program aims to help entrepreneurs, companies with smaller budgets and projects that are new and innovative.

Getting the lender interested

Preparing your small business loan proposal for consideration by a SBIC begins with searching a directory of firms in your geographical area that may have an interest in working with your business type. Each SBA licensed SBIC has funding requirements specific to their firm. It is important to familiarize yourself with the types of projects they fund and any criteria the lender specifies. During your search, consider the stage in the life cycle your business is in and compare it to the SBIC funding priorities. Contact the SBIC you identified during your search and speak with a project or loan officer about your business. Consider this an informal introduction. Ask questions, take notes and listen closely to any recommendations.

Keeping the conversation going

Evaluate your current business plan for compatibility with the SBIC criteria and additional information gleaned from the initial contact. There are several types of business plans, and you must ensure your plan is written in the format and presents the information the SBIC needs for consideration. The National Association of Small Business Investment Companies indicates your business plan should minimally present operations, management characteristics, current financial conditions, and funding requirements. Rewrite and reorganize your business plan to suit the conditions of the specific SBIC application. Pay careful attention to the financial section of the plan; it should explain how you plan to profit and what the funds will be used for in the plan.

Understanding the business plan

There are many types of business plans. Generally, a business plan includes the following sections:

  • Executive Summary
  • Business Description
  • Market Summary
  • Organization and Management
  • Financials
  • Appendix

Schedule a formal presentation of your business plan once you are sure your plan format and content meets the criteria set forth by the SBIC. Make sure you have copies for everyone planned to meet with you, and several extras. Sample business plans, business plan templates, and information on growing your small business are available.