Small Business Tax Changes to Help You Prepare 2017 Taxes
Current Small Business Tax Changes - And Prior Year Changes
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 2017 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 2017 business tax return that you are preparing in 2018.
The 2017 tax year ends on December 31, 2017, 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 2017 business tax year may end on a different date, depending on when the fiscal year for your business ends.
Federal income taxes are due for different business types on the following dates
- For sole proprietors and single-member LLC's preparing their business taxes on Schedule C: April 17, 2018
- For partnerships and S corporations: March 15, 2018
- For corporations; April 17, 2018
The dates reflect the changes for due dates that fall on a weekend or holiday. In these cases, the due date for that year is the first weekday.
2017 Personal and Business Tax Rates
The 2017 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 2017 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 2017. Here are the rates:
- 53.5 cents per mile for business miles
- 17 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 purposes, 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 amount of wages on which withholding is based has been increased for 2017, to $127,200. This maximum affects employees and it also affects small business owners who must pay self-employment tax.
If a business owner has income both a business and employment, the employment income is considered first, then earnings from self-employment.
Additional Medicare Tax
- 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 Depreciation Deductions
Congress approved two accelerated depreciation benefits for businesses, permanently increasing Section 179 deductions on purchases of business assets and increasing bonus depreciation on purchases of new equipment. These increased deductions
- 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, but it will be phased out over the next few years, as an incentive to businesses for purchasing new equipment. The bonus depreciation amount is 50% for 2015, 2016, and 2017, reduced to 40% for 2018 and 2019.