The New York Times recently reported that the expiration of about four dozen federal tax credits—called “extenders” because they expire periodically—is having a substantial impact on small businesses. Extenders that Congress has not renewed include the Work Opportunity Tax Credit, the research and development tax credit, and a $500,000 ceiling on the Section 179 expense election that allows businesses to write off capital expenditures in the year they were incurred.
These tax credits are often extended and even reinstated retroactively, but the political climate and a widely shared goal in Washington to remove business deductions in favor of lowering the corporate tax rate have experts concerned that it may not happen this year. Tax experts argue that this uncertainty has made planning difficult for businesses, and has led businesses to making cautious choices about capital investment, research spending, and hiring. Kate Barton, a representative from Ernst & Young, noted that businesses are assuming that no news is bad news. She further notes that this uncertainty has an effect on businesses that would not use the credit.
It’s not all bad news for small businesses, though. The tax credit for businesses with 25 or fewer full-time employees that pay at least half of health insurance premiums rose to 50% of the amount paid, up from 35%.
