Owning a business isn’t just a lot of work – it’s an expensive feat. With changing health care laws, increased minimum wages and new credit card technology, small business owners have had many important changes to keep up with in recent years, especially with regard to the things they pay for and the taxes they owe. One such change that’s particularly relevant this time of year is the Protecting Americans from Tax Hikes Act of 2015, better known as the PATH Act.
Passed in December of 2015, the PATH Act increased and froze the amount that small business owners can deduct from their taxes for certain business expenses. Under the PATH Act, businesses that spend $2 million or less on equipment can deduct the full purchase price of that equipment, up to $500,000. This deduction falls under Section 179 of the tax code. The Section 179 limit – currently at $500,000 – has fluctuated over the years, giving small business owners the opportunity to deduct as much as $500,000 some years and as little as $25,000 other years. The PATH Act not only reinstates the deductible limit at $500,000, but it also makes that limit permanent.
Under a complex tax code like that of the United States, it may not seem like changing a single section could do much, but the PATH Act creates an exciting opportunity for small businesses. According to the National Federation of Independent Businesses (NFIB), the PATH Act could greatly impact small business activity, potentially allowing businesses to add 197,000 new jobs and generate $18.6 billion more economic productivity than previous years. With a large deduction available, business owners may be more likely to invest in valuable upgrades like additional manufacturing equipment, new fleet vehicles and more. As a result, they could expand their business operations, employ more workers and offer current employees additional benefits and perks.
Running a business may not become any easier, but the PATH Act can at least make it a little less expensive. When filing your taxes this year, think about the Section 179 deduction that could be available. Consult your business’s accountant or tax advisor for professional advice related to Section 179 and other tax deductions available to small businesses.
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