As with every other year, business owners around the United States have to learn about the new business tax changes that will come into effect for 2014. When learning about these amendments to tax laws, it’s important for you to understand that not all of these changes will directly impact your particular business. Some of these tax modifications will only effect people in the highest tax brackets while others may actually be helpful to your business. Either way, it’s advisable to take some time to learn about these changes so you can prepare your taxes accordingly.

Federal Income Tax Increase

As of the 2014 tax season, the federal income tax rate for businesses and individuals earning $400,000 or more jumped from 35 per cent to 39.6 per cent. This is the highest base rate that can be applied to income in the United States. Of course, it should be made clear that the 39.6 per cent is not set in stone as there are many tax credits and benefits that can be applied for depending on a number of different circumstances. Marginal increases may apply to businesses and business owners in lower tax brackets, but it depends on a number of factors.

New Medicare Tax

For businesses that are heavily involved with investments, there is a new tax on the books that you need to know about. It’s known as the “Medicare Investment Tax” and it applies to all investment income you make throughout the year. The tax is 3.8 per cent of the total income made through investments and it is added onto the new capital gains rate that was passed down this year. Last year, capital gains tax held steady at 15 per cent. This year, the capital gains tax has risen up to 20 per cent not including the Medicare tax. With the Medicare tax applied for investment income, the total capital gains tax liability of the average business will be 23.8 per cent.

Multi-State Tax Concerns

There are a number of issues facing business owners that do business across state lines. As online retail and other forms of interstate transactions become more commonplace in the Internet culture, federal and state taxes have finally gotten up to speed with today’s technology. Businesses that perform transactions in multiple states will find a number of new state-based sales tax measures that they must now comply with. Compliance with these new laws can be very complex, so it’s best to learn about these laws on a state to state basis.

Tax Change for Improving Property

One benefit that business owners have in 2014 is that the rules on tax credits for improving business properties have been clarified. Business owners can now expense 100 per cent of the improvement cost up to $10,000 or 2 per cent of the building’s total value. The credit is applied to whatever amount is the lowest of those two numbers. For example, if your building has an appraised value of $100,000, then you would only be able to expense up to $2,000. If your building was valued at $1,000,000, then you would only be able to expense up to $10,000.

Preparation

The truth is that changing tax landscapes are all part of what it means to be a business owner. Staying on top of these changes can be a great way to keep your business in the black and on the right side of the IRS. In the end, a little research and forethought can go a long way toward making tax-time simple.