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How the Taxpayer Relief Act of 2012 affects business

Down-to-the-wire tax law changes have become the norm over the past several years, and 2012 was no exception. As the country skidded toward the fiscal cliff, The American Taxpayer Relief Act of 2012 was passed by Congress on Jan. 1, 2013, and signed into law by President Obama the next day.

Here are a few provisions that affect businesses:

Section 179 expensing. Enhanced Section 179 small business expensing has been extended for 2012 and 2013. The limit for this year and last is $500,000, with a $2 million investment limit. (For businesses reaching the investment limit, the allowable Section 179 amount is decreased by $1 for each dollar invested in qualifying property over the limit.) Without the extension, Section 179 expensing would have been $125,000 in 2012 and would have reverted to $25,000 starting in 2013.

Bonus depreciation.
Fifty percent bonus depreciation has been extended through 2013. Bonus depreciation has also been extended to apply to passenger vehicles purchased and placed into service by
a business.

Research tax credit.
This credit had expired in 2011, but is now extended through 2013. The credit may be claimed for business-related qualified research expenditures for the tax year that exceed the average annual expenditures for research over the four preceding years.

Work Opportunity Tax Credit. This credit is available to eligible employers who hire individuals within a targeted group (generally, individuals receiving need-based assistance, qualified veterans and certain others). The credit is generally equal to 40% of first year wages, with maximum wages varying by targeted group.

If you’re interested in a loan to purchase qualifying equipment for Section 179 expensing or bonus depreciation, contact a business banker at American River Bank!
To learn more about how these and other tax credits may apply to your organization, consult with your tax advisor or attorney.

How new tax laws affect your capital gains
The American Taxpayer Relief Act made permanent the Bush-era tax rates, with the exception of creating a new 39.6% federal income tax rate for taxpayers with taxable incomes above $400,000 (single) or $450,000 (married filing jointly).

Taxpayers who reach that threshold will also be subject to a higher long-term capital gains rate (20%, up from a maximum of 15% for everyone below the $400,000/$450,000 threshold).

However, since tax law is never simple, the income thresholds that trigger the 3.8% surtax on net investment income under the Patient Protection and Affordable Care Act are $200,000 for single filers and $250,000 for those married filing jointly. So if your income falls between $200,000 and $400,000 (single) or $250,000 and $450,000 (married filing jointly), your long-term capital gains tax rate is 18.8% (15% + 3.8% surtax). If your income is above $400,000 (single)/$450,000 (married filing jointly), your long-term capital gains rate is 23.8%.

Note that neither this financial institution nor any of its affiliates give tax advice. Consult your tax advisor or attorney for information specific to your situation.