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Norman Grill: Business tax changes for 2020 filings

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Here are some tax changes you should know about for your 2020 business filing.

Standard mileage rates
The standard mileage rate for 2020 is 57.5 cents per business mile driven.

Health care tax credit
for small businesses
Small-business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $50,000 (adjusted annually for inflation). This amount is $55,200 for 2020 returns.

In 2020 (as in 2014-2018), the tax credit is worth up to 50 percent of your contribution toward employees’ premium costs (up to 35 percent for tax-exempt employers.

Section 179
expensing and depreciation
Under the Tax Cuts and Jobs Act of 2017, the Section 179 expense deduction increases to a maximum of $1.04 million of the first $2.59 million of qualifying equipment placed in service during the current tax year. The deduction was indexed to inflation for tax years after 2018 and enhanced to include improvements to nonresidential qualified real property such as roofs, fire protection, and alarm systems and security systems, and heating, ventilation, and air-conditioning systems.

Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before Jan. 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. The standard business depreciation amount is 27 cents per mile (up from 26 cents per mile in 2019).

Work Opportunity Tax Credit
Extended through 2020 under the Further Consolidated Appropriations Act, 2020, the Work Opportunity Tax Credit can be used by employers who hire long-term unemployed individuals (unemployed for 27 weeks or more). It is generally equal to 40% of the first $6,000 of wages paid to a new hire.

SIMPLE IRA plan contributions
Contribution limits for SIMPLE IRA plans increased to $13,500 for persons under age 50 and $16,500 for those age 50 or older in 2020. The maximum compensation used to determine contributions is $285,000.

This column is for information only and should not be considered advice. Taxes are complex and mistakes can be costly, so consider seeking the advice of a tax professional.

Norm Grill, (N.Grill@GRILL1.com) is managing partner of Grill & Partners LLC (www.GRILL1.com), certified public accountants and consultants to closely held companies and high-net-worth individuals, with offices in Fairfield and Darien, 203-254-3880.

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