It has been quite the busy year when it comes to tax changes. While everyone will have a tax change that affects them, as a small business owner, you need to be aware of a few different changes that will affect your business’s taxes. The bad news about these changes is you may have been too busy to keep up with them on your end. And since some of these changes were announced not that long ago, you probably haven’t had the time to really look into those. The good news is we have been keeping up with all of these new tax changes all year long. So, we are prepared with all of the current information you need to know.
Tax Changes for 2021 You Must Know for Your Small Business
1. Standard Mileage Rates
The standard mileage rates changed yet again for 2021. The rate you will need to use for your taxes in 2021 is 56 cents per business mile that was driven.
2. Employer-Provided Transportation Benefits
If you are one of the employers that provides assistance to your employees for their transportation for business, you will see a change in the monthly limitation. In 2021, the monthly limit for transit passes, qualified parking, and transit passes is $270.
3. Business Meals and Entertainment
As a small business owner, you most likely don’t have a lot of business meals and entertainment. But if you do, the Consolidated Appropriations Act allows you to deduct 100% of all business meal purchases if you dined in a restaurant in 2021.
4. Health Care Tax Credit for Small Businesses
If your small business pays for at least half of the premiums for your employees’ single health insurance coverage, you may be eligible for a tax credit. The Small Business Health Care Tax Credit is available to any small business that employs less than 25 full-time workers and the workers’ annual wages do not each exceed a specific amount. In 2021, the most an employee can make is $56,000 per year if you want to claim this credit.
5. Work Opportunity Tax Credit
The Further Consolidated Appropriations Act was extended through 2021. This Act states that a Work Opportunity Tax Credit can be given to small businesses that meet certain guidelines. If you hired a long-term unemployed person, you may be eligible for a credit that is approximately 40% of the first $6,000 you paid that employee.
6. Section 179 Expensing and Depreciation
The Tax Cuts and Jobs Act from 2017 allow businesses to deduct 100% of the cost of eligible property placed in service after September 27, 2017. This Act also includes any improvements that may have been made to the properties your business owns. The end of this credit is quickly approaching, because beginning in 2023, the credit starts to decline with only an 80% credit. And the credit will continue to decline in the following years. So, now is the time to take advantage of the credit for your business’s taxes.
Obviously, not all of these tax changes will affect your small business. But some of them will. Contact us today, so we can help you determine which tax changes for 2021 will affect your small business the most.