Yerkes and Michels, CPA, LLC Tax Tips

Section 179 and Bonus Depreciation Update:

The increased limits and phaseout for section 179 from 2010 remains the same for 2011. Limit of assets to be expensed is $500,000, the phaseout range begins at $800,000, and no expensing is available if 2.5 million of the eligible assets were acquired in the tax year. Currently, the expense limit is set to reduce to $125,000 in 2012 and $25,000 for 2013.

The 100% bonus depreciation (code section 168) for new property purchased after September 8, 2010, continues through December 31, 2011. Currently, the bonus depreciation for 2012 remains at the previously lower rate of 50%.

Benefits for Small Businesses

In 2010, business ownerswere able todeduct the cost of health insurance for themselves and their family in the calculation of their 2010 self-employment tax. However, this benefit was not extended into 2011. Self employment tax will instead reflect the 2% reduction from 15.3% to 13.3% based on the reduced OASDI (social security) tax rate during 2011. Currently, this reduction has been extended for only the first two months of 2012.

The Small Business Health Care Tax Credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by calling our officeand speaking to one of our accountants.

Additional small business credits have been created, altered, or extended for the 2011 and 2012 tax years. To discuss these credits or other tax and business planning topics, please contact our office at 620-331-4600.

Kansas Homestead Refund:

For qualified taxpayers, the total household income limit for the Kansas Homestead Refund for 2011 is $31,200. The Homestead Refund is a rebate of a portion of the property taxes paid on a Kansas resident's homestead. Property must be subject to property tax and includes (but is not limited to) houses (owned or rented), apartments, or nursing homes. Claimants must have been a Kansas resident for all of 2011 and meet certain age and or dependent qualifications. Homestead refund returns are due April 17, 2012; or October 15, 2012 with a timely filed extension.

Kansas Rural Opportunity Zone (ROZ):

Income Tax Credit:
Taxpayers who became Kansas residents on or after July 1, 2011, had not been Kansas residents in the previous five years, and whose previous Kansas source income was below $10,000, may be eligible for the ROZ credit. For the tax years 2012 through 2016 eligible taxpayers may receive an income tax credit equal to their current year Kansas income tax liability. Taxpayers must reside in an eligible rural opportunity zone, which includes Chautauqua, Wilson, and Woodson counties. Kansas income tax returns claiming the credit must be timely filed.

Assistance with Student Loan Repayment:

For the ROZ counties participating in this program (including Chautauqua, Wilson, and Woodson) through the Kansas Department of Commerce, taxpayers eligible for the ROZ income tax credit may be eligible for assistance up to $3,000 annually ($15,000 cumulative limit) on the repayment of eligible student loan balances. Loans from both in-state and out-of-state institutions may qualify.

IRS Circular 230 Disclosure: Pursuant to requirements related to practice for the Internal Revenue Service, any tax advice included in this communication was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax provision.