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4 Tax Breaks Every New Small Business Owner Should Know

Author: Clare Curley Date: March 17, 2014

These write-offs can help your bottom line.

If you’ve recently set up shop, taking advantage of tax breaks available to startups could have a significant impact on your bottom line in 2014. Four write-offs in particular are aimed at starting and sustaining new small businesses:

Section 179 Expensing

The amount a small business may expense for new equipment, furniture, vehicles and other qualifying assets for tax year 2013 is $500,000. Small business owners can also expense up to $250,000 in improvements to certain restaurant, retail and leasehold properties. These levels dropped to $25,000 for tax year 2014, says Steven Warren, CPA, of Lehrman, Flom & Co. in Minneapolis, but he expects that amount to go up.

Startup Costs

New businesses can write off up to $5,000 on their federal tax returns in marketing costs, office supplies and other capital expenses related to starting a business.

Local Investment Incentives

“Many states have an angel investor credit or something similar to stimulate investment and growth,” says Warren. You may have to apply to qualify for one.

Small Business Healthcare Tax Credit

As part of the Affordable Care Act, employers that have fewer than 25 full-time equivalent employees, pay an average wage of less than $50,000 a year and pay at least half of employee health insurance premiums are eligible for a tax credit. The maximum credit for small businesses is 35 percent of premiums and is slated to increase to 50 percent for tax year 2014, but coverage must be purchased through the Small Business Health Options Program. Many small businesses have found this credit difficult to obtain.

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