If you haven’t yet filed your small business taxes, the information below might spur you to get that necessary task completed. From home business deductions to employee benefit tax deductions, you are likely to be entitled to at least some of these.
Employee Retention Tax Credit: Companies can get a maximum of $21,000 for keeping workers employed through Sept. 30, 2021. However, if you started your business after Feb. 15, 2020, it’s considered a recovery startup business, and the maximum credit is $50,000.
Tax Credits for Paid Leave: If you paid qualified sick or family leave related to Covid-19 or vaccinations through Sept. 30, 2021, you may be eligible for a credit due to the Families First Coronavirus Response Act (FFCRA) and American Rescue Plan (ARP).
Business Interest Expenses: You can deduct business interest expenses paid or accrued in the taxable year, not to exceed the sum of your business interest income for the year, 30% of your adjusted taxable income (ATI) for the year, and your taxpayer’s floor plan financing interest expense for the year. Certain small businesses are exempt from this limit, known as the Section 163(j) limitation.
Paycheck Protection Program (PPP) Loans: Currently, you can deduct expenses paid with PPP loans. Guidance may change before tax filing time, so it’s vital to diligently track payroll and fees paid with PPP funds or other government grants or loans.
Charitable Contributions: Individuals can claim up to $300 in charitable donations (or $600 as a married couple filing jointly) even if they don’t itemize deductions. If you itemize, you can deduct cash donations to qualifying charitable organizations that are up to 100% of your adjusted gross income (AGI). C corporations can claim deductions worth up to 25% of taxable income for cash contributions.
2022 will be the last year you can take the total deductions for Section 179, bonus depreciation, and qualifying business meals. Although this could change, it’s a good idea to take advantage of these deductions before the January 1, 2023, deadline to acquire and place assets into service.
Like 2020, you can purchase certain fixed assets and take the entire Section 179 depreciation deduction in 2021 (referred to as first-year expensing). 2022 is the last year businesses can deduct 100% of qualified expenses.
While more people have been working from home during the pandemic, not everybody will be able to take advantage of the home office tax deduction. This tax break is for those who are self-employed, freelancers, independent contractors, or gig workers.
Due to the Tax Cuts and Jobs Act of 2017, those who work for an employer in W-2 positions are no longer eligible for the tax break. However, if you worked for an employer but also had a freelance side job or were temporarily self-employed, you can claim the deduction during the months you worked in those positions, although you must have some Schedule C income to be eligible.
Several deductions and credits expire in 2021. Take advantage of these now and consider how their elimination could affect your income and corporate tax rate in 2022. Pay attention to the latest IRS guidance in every case.
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“Let’s Talk Business” is a weekly column of the Emporia Area Chamber of Commerce and Visit Emporia. The mission of the Chamber is to be proactive in creating an environment for business and community success, guided by the vision that positive attitudes promote positive actions. Contact us at 620-342-1600 or email@example.com and visit our website at www.emporiakschamber.org.