written by Kevin Hogan
Many Missouri small businesses may now qualify to claim a special state tax deduction for each new job they create in 2012, 2013 and 2014. Prior to 2012, the tax deduction had been limited to sole proprietors and C-Corporations; but has now been extended to include LLC’s and S-Corporations (i.e. tax deduction is passed through to owners). The following summary provides an overview of the state tax deduction:
Eligible Small Business:
- Employ fewer than 50 full-time and part-time employees at all times during the tax year for which the deduction is taken.
- Completed at least 52 consecutive weeks of full-time employment (average 35-hours/week)
- Earned wages for the 52 week period above the “county average wage” as determined by the department of economic development (i.e. Greene County Average wage for 2011 was $35,379)
- Not previously employed in Missouri by the small business or any business affiliated with the small business for a period of 12 months prior to the creation of the new job.
State Tax Deduction:
The deduction equals $10,000 for each new job created or $20,000 for each new job created in which employer paid at least 50% of the employees’ health insurance.
“New” Jobs Created:
The small business must choose a single date to compare the number of full-time employees on that date in the deduction year, to the number employed on the same date in the immediately preceding year.
Example: ABC, Inc., an S-Corporation, had fewer than 50 full-time and part-time employees in Greene County for all of 2012. ABC chooses November 1 as its comparison date. On November 1, 2012, ABC employed 35 full-time workers, and on November 1, 2011, ABC had only 33 full-time workers. The two new full-time employees made more than the county average wage of $35,379.
ABC, Inc. is allowed to deduct an additional $20,000 (2 times $10,000) on their 2012 state income tax return. The $20,000 deduction is passed through to the S-Corporation shareholders, who take the deduction on their Missouri state income tax return. Total tax savings to the shareholders would be $1,200 (6% state tax rate times the $20,000 deduction).
Contact us if you have any questions about this deduction.