The Tax Increase Prevention Act: What You Need to Know

It may surprise some business owners to know that many of the benefits they experience are a direct result of tax laws and credits put into place to make it easier and less expensive for them to operate. This article addresses the Tax Increase Prevention Act of 2014 and its impact on small businesses this tax year.

What Is the Tax Increase Prevention Act of 2014?

According to GovTrack, the Tax Increase Prevention Act of 2014 is a bill designed to revise the IRS code of 1986, extending certain tax provisions that are expiring for individual tax extenders, business tax extenders, and energy tax extenders. The bill, introduced on December 1, 2014, was enacted and signed by the president on December 19, 2014.

For businesses, a variety of tax credits has been extended — including an extension on the impact of depreciation expense. The bill will now raise the amount that small business owners can deduct for capital purchases from $25,000 to $500,000.

What the Tax Increase Prevention Act Means for Small Businesses

In a nutshell, the tax credits, provisions, and deductions that small businesses have taken advantage of for years will be reinstated with this new bill. The extension could potentially save small businesses billions of dollars in taxes.

Small business owners should be sensitive to this new tax act and monitor it closely as its extension is only granted through the end of 2014 based on a report provided by the Committee on Ways and Means.

Business owners should consider working closely with their accountants so that they are aware of how any additional changes could impact their specific business, as the bill affects many areas across a variety of industries.

Additionally, according to GovTrack, the Tax Increase Prevention Act impacts other key provisions that many small business owners may already be familiar with, including:

• An extension of accelerated depreciation for qualified leasehold improvements.
• An increase in expense allowances for business assets, computer software, and other qualified real property.
• An extension of bonus depreciation for certain business property, and more.

Industries Affected by the Tax Increase Prevention Act

Some of the industries that the tax act has had an impact on include provisions in real estate, entertainment, and education. For example, there are extensions of:

• deductions for certain expenses for elementary and secondary school teachers,
• deductions for state and local sales taxes,
• tax-free distributions related to individual retirement plans for charitable purposes,
• research credit that includes tax credits that are associated with research and development expenses, and
• an extension to the provision as it relates to work opportunity tax credit.

Small business owners should be alert and aware of the new laws and new provisions as well as changes to the old ones, as they can have a major impact on the way business owners run their business for many years to come.