Many small business owners are worried about their personal tax rates. Sole proprietors, partners and owners of what are called S corporations, all report the income from their businesses on their individual Form 1040 returns. That means their companies are in effect taxed at personal rates, which can be higher than corporate rates.
One of the most important tax provisions for small businesses, what's known as the Section 179 deduction, will shrink to $25,000 next year from $125,000 in 2012. The deduction, which applies to equipment purchases, was $500,000 in 2011. Congress can increase the deduction at any time, even after 2013 has begun. But for the time being, business owners can't count on getting a big break.
"It's a huge change for companies planning on making investments," McCracken says.
It's not known if Congress will extend the 2 percentage point payroll tax cut that workers have had for two years. If it doesn't, consumers will have less money in their paychecks to spend, and that is likely to affect retailers and any other small businesses that sell directly to the public.HEALTH CARE Health care has been another source of uncertainty for small business owners. The new year will bring some, but probably not all, of the answers to questions about how the new health care law will affect them. Many will have to devote some time to understanding the law â¿¿ or hire someone to help them do it. "They'll have to get their arms around the law, look at their options, learn more about the exchanges," says John Arensmeyer, CEO of Small Business Majority, a lobbying group. Under the law, companies with 50 or more employees will be required to provide affordable health care insurance for their employees starting Jan. 1, 2014. During 2013, federal and state health insurance exchanges will be set up, and owners will be able to see how much it will cost them to buy insurance. As the year begins, however, many small business owners don't know whether their states will be creating exchanges, or whether they'll have to go into the national system â¿¿ and they don't know what that will mean for their costs.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV