Here’s what company owners should know about 2022 tax legislation
Standard Mileage Rates
Because of inflation, there were 2 standard mileage rates in 2022: 62.5 cents per business mile driven (July 1-December 31, 2022) and 58.5 per business mile driven (January 1-June 30, 2022).
Health Care Tax Credit for Small Businesses
Small company employers that cover at least half of the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit if they employ less than 25 full-time workers and their average yearly salary do not exceed $50,000. This sum is modified annually for inflation (for example, $56,000 for 2021 returns).
The tax credit is worth up to 50% of your payment toward employee premium expenses in 2022. (up to 35 percent for tax-exempt employers).
Section 179 Expensing and Depreciation
For 2022, the Section 179 cost deduction has been enhanced to a maximum deduction of $1.08 million of the first $2.70 million of eligible equipment placed in operation during the current tax year. For tax years beginning after 2018, the deduction is linked to inflation and expanded to cover upgrades to nonresidential eligible real property such as roofing, fire protection, alarm systems and security systems, and heating, ventilation, and air-conditioning systems.
Businesses can deduct 100% of the cost of qualified property placed in operation after September 27, 2017, but before January 1, 2023, after which it will be scaled down over the course of four years: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. The normal figure for commercial depreciation is 26 cents per mile (same as 2021).
Tax Credit for Work Opportunity (WOTC)
Extending through 2025 (The Consolidated Appropriations Act, 2021), the Work Opportunity Tax Credit can be utilized by firms who hire long-term jobless persons (unemployed for 27 weeks or more). It is typically equivalent to 40% of the first $6,000 in pay paid to a new employee.
If you have any questions concerning the Work Opportunity Tax Credit, please call.
SIMPLE IRA Plan Contributions
In 2022, the contribution limits for SIMPLE IRA plans rose to $14,000 for those under the age of 50 and $17,000 for people over the age of 50. The maximum compensation that can be utilized to calculate contributions is $305,000.
Please contact the office if you would like additional information about these and other tax deductions and credits to which you are eligible.