written by Amy Shewmaker

Small business incentives, reforms to ACA taxes, and other proposals in Obama’s FY 2017 budget could gain traction in 2016. The budget proposals include changes to Code Sec. 179 expensing, the high-dollar health care excise tax, small business tax incentives, and expanded opportunities for retirement savings, and revisions to the net investment income tax.

Small Businesses

A goal of many small businesses was made permanent by the Protecting Americans from Tax Hikes Act of 2015. Under the President’s new proposal, however, the annual expensing limitation would increase from an inflation-adjusted $500,000 to an inflation-adjusted level of $1,000,000. The phase-out threshold would remain at an inflation-adjusted level of $2,000,000. President Obama also proposed to increase the deduction for start-up expenses and the tax break for small employers that obtain health coverage for their employees through SHOP.

High-Cost Health Plans

Certain employer-sponsored health insurance plans may be liable for an excise tax. Generally, if the cost of applicable employer-sponsored coverage provided to an employee exceeds a statutory dollar limit, adjusted annually, the excess benefit is subject to a 40 percent excise tax.

Originally, the Affordable Care Act imposed the excise tax on high-cost health plans effective after 2017. The PATH Act delayed the excise tax on high dollar health plans until after 2019. President Obama has proposed to increase the excise tax threshold to the greater of the current law threshold or a “gold plan average premium”.

Retirement Savings

In his 2016 State of the Union Address, President Obama urged lawmakers to expand the availability of retirement savings plans, especially to part-time employees and workers at businesses without retirement plans. The President’s proposal would require employers to offer an automatic payroll-deduction IRA option for business that have been in operation for at least two years, have more than ten employees, and currently offer no retirement plan.

Higher Income Individuals

President Obama renewed proposals to tighten tax breaks for higher income individuals. A minimum 30 percent tax will still be imposed on high-income taxpayers; certain tax expenditures of higher income individuals would be capped at 28 percent, and tax rates on capital gains and qualified dividends would be increased.

If you have any questions regarding the tax and incentive changes in the President’s new budget proposal, please contact us at 417-881-0145.