Expiring Tax Credits: Use Them Before You Lose Them!

Daszkal Bolton understands that business owners are busy focusing on the day to day task of managing their companies and aren’t always able to focus on tax issues ahead of time. As a result, we want to remind you about several money saving tax incentives that expire on or before the end of 2011, so you can use them before they are gone!

Key Point: There are several business tax incentives expiring at the end of the year. Timing is critical! If you are unaware of how these incentives can benefit your company’s tax situation, Daszkal Bolton can assist you in determining which incentives offer you optimal savings!

Expiring Business Tax Incentives

A list of the most applicable expiring tax incentives to the broader business community includes:

• Work Opportunity Tax Credit - This tax credit encourages companies to hire individuals from groups with a high unemployment rate (e.g. Veterans) or other special employment needs. Businesses may claim the credit if they paid or incurred qualified first year wages to a targeted employee group. A business does not have to be located inside a renewal community, empowerment or enterprise zone to qualify for the credit, but must obtain certification that the employee is a member of a targeted group. This tax credit is scheduled to expire on August 31, 2011.
• 100% Bonus Depreciation – The bonus depreciation deduction for qualifying property placed into service after September 8, 2010 and through 2011 was increased to 100%. Once the incentive expires the depreciation rate reverts back to 50% bonus depreciation. This incentive expires on December 31, 2011.
• Self-Employment Tax Reduction – In 2011, the self-employment tax was reduced on a temporary basis. Individuals who are self-employed only need to pay a Social Security tax of 10.4% (reduced from 12.4%) and 2.9% Medicare tax on qualifying income. Self-employed individuals can also take a deduction for the 6.2% employer’s share of Social Security with a 1.4% employer’s share of Medicare as an above-the-line deduction. This tax incentive expires on December 31, 2011.
• Section 179d Depreciation Provisions - The increase in expensing limits under Section 179d for 2011 at $500,000/$2,000,000 (equipment/property) will be phased out at the end of 2011. In 2012, the rates will reduce to $125,000/$500,000 (equipment/property) until December 31, 2012. This expanded depreciation incentive expires on December 31, 2011.
• 15 Year Straight Line Depreciation – This incentive allows property owners and lessees to depreciate qualifying improvements to commercial office spaces, as well as restaurant leasehold improvements and new restaurant development. This tax incentive expires on December 31, 2011
• Enhanced Charitable Deductions. This tax credit allows C-Corporations the opportunity to claim an enhanced charitable deduction for qualified computer contributions, book inventories to schools and food contributions to food depositories. This tax deduction expires on December 31, 2011
• Indian Employment Credit - This tax credit provides businesses with an incentive to hire qualifying individuals that live near or on an Indian reservation. A qualifying business does not have to be located inside a renewal community, empowerment or enterprise zone to qualify for the credit. A business can claim the credit if it paid qualified wages and health insurance coverage to qualified employees. This credit expires on December 31, 2011.
• Employer Wage Credit for Active Military Reservists – This tax credit provides eligible small businesses (companies with 50 or fewer employees) with a credit against the company’s income tax liability for a taxable year in an amount equal to 20% of the sum of the wage payments made to activated military reservists. This tax credit expires on December 31, 2011.
• New Markets Tax Credit – This tax credit offers a 39% credit on an equity investment to a Community Development Entity (CDE) that is claimed over a 7 year compliance period. The CDE must then make a Qualified Equity Investment or loan to a Qualified Business in a Qualified Low Income Community (LICs). Most commercial and mixed-use real estate development located in LICs are considered Qualified Businesses. The credit is designed to encourage investment in LICs that traditionally have limited access to debt and other sources of investment income. The New Markets Tax Credit expires on December 31, 2011
• Credit for Construction of New Energy Efficient Homes - This tax credit provides an eligible contractor which constructs a qualified new energy efficient home a credit of up to $2,000 per home. The credit is available for all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards. This tax credit expires on December 31, 2011.
• Energy Efficient Appliance Credit. This tax credit is available to companies that manufacture or produce qualifying models of refrigerators, dishwashers and washers/dryers. The credit is available for models produced in 2008, 2009, and 2010. The amount of the credit is dependent on the efficiency of the model and date the appliance was manufactured. This tax credit expires on December 31, 2011.
• Alternative Fuel Vehicle Refueling Property Credit. This tax credit provides a 30% credit on the cost of any alternative fuel vehicle refueling property placed into service in 2011 (not including hydrogen stations). The credit is limited to $30,000 per location for commercial clean fuel property, and $1,000 per location for residential clean fuel property. This tax credit expires on December 31, 2011.
• Conversion Credit for Plug-In Electric Vehicles – This tax incentive provides a 10% credit against the cost of converting a motor vehicle to a qualified plug-in electric drive motor vehicle. The total value of the credit cannot exceed $40,000. This tax credit expires on December 31, 2011.
• Credit for Railroad Maintenance/Upgrade Expenditures – This is a railroad industry tax credit offered for track maintenance. The credit grant is an amount equal to 50% of qualified track maintenance expenses and other qualifying railroad infrastructure projects. This credit expires on December 31, 2011.
• Other Expiring Incentives Include:

Accelerated depreciation for business property on an Indian reservation

Alcohol fuels income tax credit

Election to expense advanced mine safety equipment

Grants for specified energy property (In lieu of tax credits)

Income tax credit for renewable diesel fuel

Contact Us

If you are unsure whether your business is eligible for any of these tax credits set to expire in 2011 then you should CONTACT US now! It is essential if your business is eligible that you plan ahead to ensure you can take full advantage of these opportunities before they disappear. For additional information please contact Teri Kaye, CPA, at 561-367-1040, or click here to email Teri. In a brief consultation she can assess your situation and determine the most beneficial way to leverage applicable credits.