Tax Reforms for 2014

San Jose Tax Lawyers describe the number of proposed tax changes that will take place, specifically in regards to Business Proposals & Estate / Gift Tax Proposals, as a result of Obama Tax Reformation in 2014.

Business Proposals

  • Make permanent the $500,000 Sec. 179 deduction with a $2million phase-out threshold.
  • Enhance and make permanent the research credit and increase the simplified credit percentage to 14%.
  • Permanently extend the work opportunity tax credit (WOTC) to wages paid to qualified individuals who begin work after Dec. 31, 2013.
  • Offer a one-time, temporary, 10% tax credit for increases in company wage payments over wages paid in 2012, whether driven by new hires, increased wages or salaries, or both.
  • Require employers who have over 10 employees and do not currently offer a retirement plan to enroll their employees in a direct-deposit Individual Retirement Account (IRA) that is compatible with existing direct-deposit payroll systems. (Employees can opt out if they choose.) Employers would be entitled to a tax credit of $25 per participating employee, up to $250 per year, for six years.
  • Deny deductions for punitive damages.
  • Make the 100% exclusion permanent for qualified small business stock (QSBS) acquired after Dec. 31, 2013.
  • Permanently double the maximum amount of start-up expenditures that a taxpayer may deduct (in addition to amortized amounts) in the tax year in which a trade or business begins from $5,000 to $10,000 for tax years ending on or after the date of enactment. Reduce this maximum amount of start-up expenditures (but not to below zero) by the amount that start-up expenditures with respect to the active trade or business exceed $60,000.
  • For tax years beginning after Dec. 31, 2012, expand the group of employers who are eligible for the tax credit available to small employers providing health insurance to employees so as to include employers with up to 50 full-time (or the equivalent) employees, and begin the phase-out at of the restriction to no more than 20 full-time equivalent employees.
  • Create a new general business credit against income tax equal to 20% of the eligible expenses paid or incurred in connection with insourcing a U.S. trade or business.
  • Disallow deductions for expenses paid or incurred in connection with outsourcing a U.S. trade or business.

Estate and Gift Tax Proposals

  • Beginning in 2018, return to 2009 levels the estate, generation-skipping transfer (GST), and gift tax exemptions and rates. Thus, the highest tax rate would be 45%, and the exclusion amount would be $3.5 million for estate and GST taxes and $1 million for gift taxes.
  • Require that the basis of property in the hands of the recipient be no greater than the value of that property as determined for estate or gift tax purposes (subject to subsequent adjustments). These rules would apply to transfers on or after the enactment date.

Reference the following link for more information on Obama Tax Reformation Policies for 2014.