Tax

Tax relief is available for certain small employers who provide health coverage to their employees and wish to claim the Small Business Health Care Tax Credit for 2017 and later years.

To qualify for the credit small employers must provide employees with a qualified health plan from a Small Business Health Options Program (SHOP) Marketplace and may only claim the credit for two consecutive years.

This tax relief helps employers who first claim the credit for all or part of 2016 or a later taxable year for coverage offered through a SHOP Marketplace, but don’t have SHOP Marketplace plans available to offer to employees for all or part of the remainder of the credit period because the county where the employer is located has no SHOP Marketplace plans.

As such, employers can claim the credit for health insurance coverage provided outside of a SHOP Marketplace for the remainder of the credit period if that coverage would have qualified under the rules that applied before January 1, 2014.

The notice does not affect previous transition relief for the credit that was separately provided for 2014, 2015, and 2016.

If you need help calculating the credit under these circumstances or would like more information on whether a county had or has coverage available through a SHOP Marketplace, please call.

• By Leon Clinton
• May 19, 2018

The Tax Cuts and Jobs Act has resulted in questions from taxpayers about many tax provisions including whether interest paid on home equity loans is still deductible. The good news is that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labeled.

Background

The Tax Cuts and Jobs Act of 2017, enacted December 22, 2017, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.

New dollar limit on total qualified residence loan balance

For anyone considering taking out a mortgage, the new law imposes a lower dollar limit on mortgages qualifying for the home mortgage interest deduction. Beginning in 2018, taxpayers may only deduct interest on $750,000 of qualified residence loans. The limit is $375,000 for a married taxpayer filing a separate return. These are down from the prior limits of $1 million, or $500,000 for a married taxpayer filing a separate return. The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer’s main home and second home.

For more information about deducting interest on home equity loans or the new tax law, please call.

• By Leon Clinton
• May 16, 2018

Many of the tax provisions under tax reform were favorable to small business owners including those relating to using a car for business. Here’s what you need to know.

1. Section 179 Expense Deduction

If you bought a new car in 2018 and use it more 50 percent for business use, you can take advantage of the Section 179 expense deduction when you file your 2018 tax return. Under Section 179 you can immediately deduct (rather than depreciating) the cost of certain property in the year it is placed in service. In 2018, the Section 179 expense deduction increases to a maximum deduction of $1 million of the first $2,500,000 million of qualifying equipment placed in service during the current tax year. It is indexed to inflation for tax years after 2018.

For sport utility vehicles (defined as four-wheeled passenger automobiles between 6,000 and 14,000 pounds), however, the maximum deduction is $25,000 (also indexed for inflation). Certain exceptions may apply, however such as a seating capacity of more than nine persons behind the driver’s seat. Vehicles weighing more than 14,000 pounds are typically considered “work vehicles” and would not be used for personal reasons. As such, there is no expense deduction limit.

2. Luxury Auto Depreciation Allowance

For luxury passenger automobiles placed in service after December 31, 2017, the amount of allowable depreciation increases to a maximum of $10,000. The deduction increases to $16,000 for the second year, then decreases to $9,600 for the third year and $5,760 for the fourth year and for years beyond. These dollar amounts are indexed for inflation. Deductions are based on a percentage of business use; i.e., a business owner whose business use of the vehicle is 100 percent can take a larger deduction than one whose business use of a car is only 50 percent.

3. Additional First-Year Bonus Depreciation for Passenger Vehicles

For passenger autos eligible for the additional bonus first-year depreciation, the maximum first-year depreciation allowance remains at $8,000. It applies to new and used (“new to you”) vehicles acquired and placed in service after September 27, 2017, and remains in effect for tax years through December 31, 2022. When combined with the increased depreciation allowance above, the deduction amounts to as much as $18,000.

4. 100 Percent First-Year Bonus Depreciation for Heavy Vehicles

For tax purposes, pickup trucks, vans, and SUVs whose gross vehicle weight rating (GVWR) is more than 6,000 pounds are treated as transportation equipment instead of passenger vehicles. Heavy vehicles (new or used) placed into service after September 27, 2017, and before January 1, 2023, qualify for a 100 percent first-year bonus depreciation deduction as well, if business-related use exceeds 50 percent. These deductions are based on percentage of business use and vehicles used less than 50 percent for business are required to depreciate the vehicle cost over a period of six years.

5. Deductions Eliminated for Unreimbursed Expenses for Business use of a Car

Under tax reform miscellaneous itemized expenses were repealed. As such starting in 2018, if you are an employee who is required to use your own vehicle for business-related use and are not reimbursed for these expenses by your employer you are no longer able to claim a deduction for unreimbursed expenses for business use of a car on your tax return.

Questions?

If you have any questions about business use of a car, don’t hesitate to call the office.

• By Leon Clinton
• May 14, 2018