This is what we would call a “status quo” re-election in that many of the tax and health care events that were scheduled to go into effect likely will with Obama’s recent victory. Of course, there will be some compromise with a split Congress, but small businesses can expect many of the tax and health care changes to go into effect in 2013. What does this specifically mean for small business tax and health care planning?
Capital Equipment Purchases/Section 179 Election
Businesses that were on the fence about whether or not they were going to make capital equipment and Section 179 purchases, now have a good reason to move forward in 2012 as opposed to waiting until 2013. The Section 179 deduction is scheduled to drop from $139,000 to $25,000 in 2013. In addition, bonus depreciation is now 50% for all purchases of new property/equipment and is set to expire all together in 2013. We’re not holding our breath for either of these business tax breaks to be reinstated in 2013 to 2012 levels.
Small businesses owners are likely to see higher taxes
Obama has pledged that he would support extending the Bush-era tax cuts for joint filers earning less than $250,000 a year. However, he would allow those cuts to expire for those earning over $250,000 annually and with investment income. While the Republican controlled House of Representatives will fight for lower taxes for all, we do believe there will be some compromise. Still, the 43.4% tax rate for high income earners, which includes the 3.8% investment income surtax, and those with dividend income is likely for 2013.
Health care reform
If there was any hope that the 2013 Obama-care provisions may be delayed, that’s pretty much gone with the Obama victory. This means that small businesses that employ 50 full-time employees will be required by 2014 to provide health insurance to those workers or face high fines of at least $2,000 per employee.
More health care paperwork for small business
In addition, beginning in 2013, the same health care tracking requirement for large businesses will be applied to those businesses that employ less than 250 employees. This means that more paperwork is headed your way. But, let’s be clear that this is a compliance requirement and no additional tax liability will be assessed on W-2 Forms as some have thought.
This is just the beginning
We expect to gain further clarity in the next month and half as lawmakers are forced to meet and compromise on key tax and health care issues impacting small businesses. The best piece of advice we can provide is to plan for what is scheduled to happen in 2013, which is higher taxes and more health care reforms.
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