How does the passage of PATH impact business owners?

It’s the start of a new year and for any business owner, tax planning is an important component to help increase and maximize profitability. However, due to the ever-changing tax rules and laws, many business owners find tax planning to be a confusing and tedious process.

This is due in large part to the fact that many business-related tax deductions were previously only renewed on a yearly basis. The recent passage of the Act-Protecting Americans From Tax Hikes or PATH has been heralded as a victory for business owners who now have some guarantees when it comes to annual tax deductions and breaks.

Included in PATH's provisions, Section 179 "allows small businesses to immediately deduct up to $500,000 of investments." This is a significant change from the $25,000 per year deduction allowance that was previously in place. Plus, the fact that businesses can deduct rather than capitalize or depreciate the investments over time is a huge financial benefit.

For those business owners whose investment expenditures exceed $500,000, a 50 percent deduction can be taken immediately. This provision, however, has only been approved through the year 2019, but there's always the possibility that it will become permanent.

For business owners, tax planning is an important part of any business plan. With the passage of PATH, business owners are now ensured certain deductions that can greatly impact their bottom lines. Business owners who have questions or concerns about the tax changes included in PATH, would be wise to consult with an attorney who handles tax matters.

Source: Forbes, "5 Things To Know About Year-End's Massive Tax Bill," Robert W. Wood, Dec. 23, 2015

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