Check out these 2020 Small Business Tax Provisions before it’s too late!
2020 has proposed unique challenges for all businesses but has taken the biggest toll on small businesses across the US. It has forced physician clinics and imaging centers to look at alternate methods of revenue generation, budget cuts and possible government relief programs.
Many of us are still looking into our crystal ball trying to predict what 2021 will bring but, in the meantime, the COVID-19 Relief Legislation is offering 2020 small business tax provisions that all small businesses should be considering.
The CARES Act
With the adoption of the CARES Act in the spring, the government allowed deferment of taxes and a carry back that had been previously eliminated.
- 50% of Social Security tax on net earning can be deferred (over the next 2 tax years)
- Five-year carry back of net operating losses: If your business, like many others, has had net operating losses in 2020, you can carry those losses back for up to five-years.
- If you did not apply for PPP, you are eligible to offset $5,000 per retained employee on your federal payroll tax
While SECTION 179 has been around a long time, the CARES Act added bonus depreciation, the two can be used in conjunction with each other but each various limits. Be sure to consult with your accountant to ensure that you are using the correct depreciation schedule.
Section 179 is a depreciation schedule that allows the purchaser to accelerate the depreciation schedule in the first year.
Here’s what that means for you in 2020.
- Annual limit on deduction: The maximum Section 179 deduction per year is $1,040,000. If your business spends more than $2,590,000 on a piece of equipment, the amount you are eligible to deduct starts to decrease.
- Flexibility with timing: You can choose which purchases to cover under the Section 179 deduction and which to save as future tax breaks. You can even split the deduction for individual purchases. For example, claiming half the cost of a new car upfront while spreading the rest of the purchase over time.
- Covers improvement to real estate: You can use the Section 179 deduction for real estate upgrades, like adding a new roof to your building.
Bonus Depreciation is new for 2020 due to COVID: It is different that Section 179 but also offers options when looking to purchase large pieces of equipment.
- No annual limit on deductions: This deduction isn’t limited to cost, a stark difference between Section 179 and bonus depreciation. You can deduct your entire investment no matter how much you spend per year.
- Can be larger than your business income: While a Section 179 deduction cannot be larger than your annual business income, bonus depreciation does not have this restriction. You can carry any unused deduction forward as a future tax break.
- Less flexible, must apply to all assets: Unlike the Section 179 deduction, bonus depreciation must apply to 100% of an asset’s cost and all assets must be in the same category. If you use bonus depreciation for one 5-year asset, you’ll need to use it for all 5-year assets bought that year.
Contact Us Today
As you can see there are many new programs and tax alternatives for 2020 to help off-set the business losses and fund new business revenue generators for 2021. Contact iRAD today for any of your imaging equipment needs. Be sure to consult with your tax accountant before the end of the year to take advantage of all of these programs in 2020.