How Changes to Tax Law May Impact Small Businesses in 2013

Though the American Taxpayer Relief Act, more commonly known as the Fiscal Cliff Bill, was passed back in January of this year, it still has a lot of small business owners wondering how, if at all, this new legislation will affect them.

According to the SBA, 97% of small business owners will not see an increase in their taxes in 2013. Of course this doesn’t include the 2% bump in the social security tax that went into effect after the two-year long tax holiday was allowed to expire, but by and large this is good news. However, According to Deborah Sweeney, CEO of, there are still a couple of notes small business owners should be aware of in regards to the 2013 tax season, and how legislation might impact their 2012 returns.

  • The ATRA retroactively raised Section 179 deduction limits back up to $500,000. Originally, the limit was set to drop down to $139,000 in 2012, but the previous limit of $500,000 has been extended through 2013. So investments in vital assets like equipment and software up to $500,000 might qualify for a Section 179 deduction.
    If a business was planning on buying some pricier items in 2013, now is the year to do it since there is no guarantee that the $500,000 will be extended again.
  • The ATRA also extended the Research and Experimentation Tax Credit, which originally ended in 2011, through to 2013.
  • The Patient Protection and Affordable Care Act, which was passed back in 2010, has a few provisions that are going into effect in 2013 that may impact payroll withholdings, depending on how much an employee makes. 
    If there is an employee with a wage above $200,000 for a single filer, or $250,000 for a married filer, any income in excess of those two lower limits is subject to an Addition Medicare Tax of 2.35% - .9% more than the standard Medicare withholding of 1.45%. However, there are no matching requirements for that additional .9%, so employers still just pay the 1.45% regardless of their employee’s income.
  • Finally, the ATRA does raise the tax rate for anyone making more than $400,000 as a single filer, or $450,000 as a married filer, to 39.6%. However, as mentioned above, this will not impact most small business owners.