Small Business Tax Changes to Help You Prepare 2015 Taxes

Current Small Business Tax Changes - And Prior Year Changes

Business Tax Changes - 2015
Business Tax Changes - 2015. Michael Zwahlen/EyeEm/Getty Images

Every year, tax laws change and certain IRS regulations affecting businesses change too. This article describes the current changes you need to know about to do your business tax planning and to prepare your business taxes for the current year. 

Here are the small business payroll tax and other business tax changes in effect for 2015 business taxes that you need to know about. Included in this list are changes to the Social Security maximum, IRS standard mileage rates, and new additional Medicare taxes that affect self-employed individuals.

Business Tax Changes - Effective Dates

This information is for your business taxes for your 2015 business tax return that you are preparing in 2016. 

The 2015 tax year ends on December 31, 2015 for sole proprietors filing business tax returns on Schedule C and for partnerships and S corporations. If you are filing taxes for a corporation, your 2015 business tax year may end on a different date, depending on when the fiscal year for your business ends. 

2015 Personal and Business Tax Rates

The 2015 personal income tax rates are detailed in this article by William Perez, at Tax Planning. Personal income tax rates start at 10% and gradually increase to 15%, then 25%, then 28%, then 33%, then 35%, and finally reaching a top rate of 39.6%. 

The 2015 corporate income tax rate varies from 15% to 35%, depending on the amount of corporate income subject to tax for the year.

Business Mileage Rates

The IRS standard mileage rate has changed for 2015.

Here are the rates:

  • 57.5 cents per mile for business miles
  • 23  cents per mile for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

These rates are in effect for the entire year for businesses taking the standard mileage deduction.

Businesses may decide to deduct mileage using either the standard mileage rate or actual expenses.

If you drive less than 50% for business, you probably want to use the standard rate, but if you drive over 50% for business, adding actual expenses might be better. Read more about the standard mileage rate vs. actual miles.

Social Security Maximum

The tax rate for Social Security remains the same but the maximum deduction has been increased for 2015, to $118,500. This maximum affects employees and it also affects small business owners who must pay self-employment tax.

If a business owner also has income from employment, employment income is considered first, then earnings from self-employment. Read more about how the Social Security maximum works for income from employment and self-employment.

Additional Medicare Tax 

Beginning with tax year 2013 and continuing through 2015, an additional Medicare tax rate of 0.9% is applied to combined employment income and self-employment income above these levels:

  • Married filing jointly - $250,000
  • Married filing separately - $125,000
  • Single - $200,000
  • Head of household (with qualifying person) - $200,000
  • Qualifying widow(er) with dependent child - $200,000

This additional tax must be withheld from employee pay above $200,000. For self-employed business owners, this additional Medicare tax is included in self-employment tax calculations.

In addition, also beginning with the 2013 tax year, a net investment income tax of 3.8% on investment income is imposed on higher income individuals, including business owners.

Increases in Accelerated Depreciation 

At the end of 2015, Congress approved two depreciation benefits for businesses, permanently increasing Section 179 deductions on purchases of business assets and increasing bonus depreciation on purchases of new equipment. 

  • Effective for 2015 tax year and beyond, Section 179 deductions up to 500,000 per year will allow businesses to plan for asset purchases and expense purchases immediately instead of depreciating over a period of time.  
  • Bonus depreciation has been reinstated for 2015, but it will be phased out over the next few years, as an incentive to businesses for purchasing new equipment. The bonus depreciation amount will be at 50% for 2015, 2016, and 2017, reduced to 40% for 2018 and 2019.