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2011 Expiring Business Tax Incentives

Hayashi & Wayland understands that business owners are busy focusing on the day to day task of managing their companies and can’t always focus on key tax issues ahead of time. As a result, we want to remind you about several tax saving incentives that expire at the end of 2011, so you can leverage them before it’s too late.

There are several business tax incentives expiring at the end of the year. Timing is critical! If you are unaware of how these incentives can benefit your company’s tax situation, Hayashi & Wayland can assist you in determining which incentives offer you optimal savings!

Expiring Business Tax Incentives

A list of the most applicable expiring tax incentives includes:

• 100% Bonus Depreciation – The bonus depreciation deduction for qualifying property placed into service after September 8, 2010 and through 2011 was increased to 100%. Once the incentive expires the depreciation rate reverts back to 50% bonus depreciation.
• Self-Employment Tax Reduction – In 2011, the self-employment tax was reduced on a temporary basis. Individuals who are self-employed only need to pay a Social Security tax of 10.4% (reduced from 12.4%) and 2.9% Medicare tax on qualifying income. Self-employed individuals can also take a deduction for the 6.2% employer’s share of Social Security with a 1.4% employer’s share of Medicare as an above-the-line deduction.
• Section 179d Depreciation Provisions - The increase in expensing limits under Section 179d for 2011 at $500,000/$2,000,000 (equipment/property) will be phased out at the end of 2011. In 2012, the rates will reduce to $125,000/$500,000 (equipment/property) until December 31, 2012..
• 15 Year Straight Line Depreciation – This allows property owners and lessees to depreciate qualifying improvements to commercial office spaces, as well as restaurant leasehold improvements and new restaurant development.
• Enhanced Charitable Deductions. This tax credit allows C-Corporations the opportunity to claim an enhanced charitable deduction for qualified computer contributions, book inventories to school and food contributions to food depositories.
• Employer Wage Credit for Active Military Reservists – This tax credit provides eligible small businesses (companies with 50 or fewer employees) with a credit against the company’s income tax liability for a taxable year in an amount equal to 20% of the sum of the wage payments made to activated military reservists..
• New Markets Tax Credit – This tax credit offers a 39% credit on an equity investment to a Community Development Entity (CDE) that is claimed over a 7 year compliance period. The CDE must then make a Qualified Equity Investment or loan to a Qualified Business in a Qualified Low Income Community (LICs). Most commercial and mixed-use real estate development located in LICs are considered Qualified Businesses. The credit is designed to encourage investment in LICs that traditionally have limited access to debt and other sources of investment income.
• Credit for Construction of New Energy Efficient Homes - This tax credit provides an eligible contractor which constructs a qualified new energy efficient home a credit of up to $2,000 per home. The credit is available for all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards.
• Energy Efficient Appliance Credit. This tax credit is available to companies that manufacture or produce qualifying models of refrigerators, dishwashers and washers/dryers. The credit is available for models produced in 2008, 2009, and 2010. The amount of the credit is dependent on the efficiency of the model and date the appliance was manufactured.
• Alternative Fuel Vehicle Refueling Property Credit. This tax credit provides a 30% credit of the cost of any alternative fuel vehicle refueling property placed into service in 2011 (not including hydrogen stations). The credit is limited to $30,000 per location for commercial clean fuel property, and $1,000 per location for residential clean fuel property.

Contact Us

Unsure whether your business is eligible for any of these credits? Contact us today to determine your eligibility. It is important to plan ahead to take advantage of these incentives in 2011 and beyond. For additional information, please contact Gina Anderson, CPA, at 831-759-6300, or click here to email Gina.