small business

Article Dean Dorton

Kentucky small businesses that add one or more employees, equipment,or technology in the past 24 months may qualify for a tax credit of up to $25,000 on their 2018 tax return through the Kentucky Small Business Tax Credit program. The program is available to most for-profit businesses with 50 or fewer full-time employees.

If this is you, read on for more information about this credit.

The credit is calculated as the lesser of:
• $3,500 per eligible position added, the total dollar amount invested in qualifying equipment or technology, or
• $25,000 per calendar year.

To qualify for the credit, employers must meet the following qualifications:
• Add at least one eligible position within the past 24 months (see below for the definition of an eligible position)
• Spend at least $5,000 on qualifying equipment (excluding real property) within six months before or after filling the new position

A new employee meets the eligible position requirements if the employee:
• Is subject to Kentucky individual income tax (i.e. Kentucky resident)
• Works an average of 35 hours per week or more for 12 consecutive months
• Is paid an hourly wage of at least $10.88 per hour (includes wages, tips, bonuses and commissions, but not employee benefits)
• Increases your business’s base employment (i.e. did not replace someone who left)
• Is replaced within 45 days if terminated within the 12 consecutive month period

LEARN MORE AND APPLYFor more information, please contact your Dean Dorton advisor or:

Mike Harbold, mharbold@deandortonstg.wpenginepowered.com

Erica Horn, ehorn@deandortonstg.wpenginepowered.com

Article Dean Dorton

By investing in qualified small business (QSB) stock, you can diversify your portfolio and enjoy two valuable tax benefits:

  1. Tax-free gain rollovers. If within 60 days of selling QSB stock you buy other QSB stock with the proceeds, you can defer the tax on your gain until you dispose of the new stock. The rolled-over gain reduces your basis in the new stock. For determining long-term capital gains treatment, the new stock’s holding period includes the holding period of the stock you sold.
  2. Exclusion of gain. Generally, taxpayers selling QSB stock are allowed to exclude up to 50% of their gain if they’ve held the stock for more than five years. But, depending on the acquisition date, the exclusion may be greater: The exclusion is 75% for stock acquired after Feb. 17, 2009, and before Sept. 28, 2010, and 100% for stock acquired on or after Sept. 28, 2010. The acquisition deadline for the 100% gain exclusion had been Dec. 31, 2014, but Congress has made this exclusion permanent.

The taxable portion of any QSB gain will be subject to the lesser of your ordinary-income rate or 28%, rather than the normal long-term gains rate. Thus, if the 28% rate and the 50% exclusion apply, the effective rate on the QSB gain will be 14% (28% × 50%).

Keep in mind that these tax benefits are subject to additional requirements and limits. For example, to be a QSB, a business must be engaged in an active trade or business and must not have assets that exceed $50 million.

Consult us for more details before buying or selling QSB stock. And be sure to consider the nontax factors as well, such as your risk tolerance, time horizon and overall investment goals.

Article Dean Dorton

Tax credits reduce tax liability dollar-for-dollar, making them particularly valuable. Two valuable credits are especially for small businesses that offer certain employee benefits. Can you claim one — or both — of them on your 2015 return?

Retirement plan credit

Small employers (generally those with 100 or fewer employees) that create a retirement plan may be eligible for a $500 credit per year for three years. The credit is limited to 50% of qualified startup costs.

Of course, you generally can deduct contributions you make to your employees’ accounts under the plan. And your employees enjoy the benefit of tax-advantaged retirement saving.

Small-business health care credit

The maximum credit is 50% of group health coverage premiums paid by the employer, provided it contributes at least 50% of the total premium or of a benchmark premium. For 2015, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $25,000 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $52,000.

To qualify for the credit, online enrollment in the Small Business Health Options Program (SHOP) generally is required. In addition, the credit can be taken for only two years, and they must be consecutive. (Credits taken before 2014 don’t count, however.)

Take all the credits you’re entitled to

If you’re not sure whether you’re eligible for these credits, we can help. We can also advise you on what other tax credits you might be eligible for when you file your 2015 return.