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Although some tax changes may not have been decided on yet, there are a few that we already know will impact your 2012 business tax return to be filed in early 2013.

  1. Lower 179 Deduction – In 2012 the maximum amount allowed for a business to deduct on the cost of machinery, vehicles, equipment, furniture and other property decreases from $500,000 to $139,000 and real estate no longer qualifies.
  2. Bonus Depreciation Deduction Shrinks – Previously bonus depreciation was allowable once you maxed out your 179 deduction, and you could deduct 100% of certain equipment purchases. For the year 2012, this percentage decreases to 50% with a maximum of $2 million.
  3. Retirement Plans – On the other hand, this maximum will increase in 2012. For retirement accounts, such as 401(k), 403(b) and most 457 plans, you can contribute an additional $500 per year, totaling $17,000. For accounts such as SEPs and profit sharing plans, the contribution maximum increases to $50,000 from $49,000 per year.
  4. Social Security Wage Base Increase – The amount of income that will be taxed for Social Security starting in 2012 will increase to $110,100, a jump of $3,300 a year.
  5. The 1099-K – Although this was introduced in 2011, the rules go into effect in 2012 for tax returns. Any amount in excess of $20,000 or over 200 total transactions for the year received by a third party payment processor on your behalf will have to be claimed on your tax return separate from your total earnings declaration.
  6. Reduction in Adoption Assistance – Employers are allowed to assist an employee who is adopting a child to exclude those funds from their income. For 2012 this amount decreases to $12,650 from $13,360 in 2011.

Staying current with the changing tax laws is essential for a successful business. For planning opportunities that can give a better idea on what your tax return will look like this year, contact your accountant today.