What Are the CARES Tax Breaks for Businesses?

Amherst, NH Business Owner Seeks Advice

There are several tax breaks for businesses under the CARES (Coronavirus Aid, Relief and Economic Security) Act.  Charitable contributions are adjusted from a maximum 10% of the company’s taxable income, to 25% of cash donations.  Payment on the employer share of Social Security tax on payroll can be deferred until the end of the year and a tax credit is available of up to $5,000 per employee.  The cap on a business loss has also been suspended.

A business owner in Amherst was struggling with keeping his business afloat during this economic downturn.  Looking for advice, he contacted the experts at Merrimack Tax Associates.

CARES Tax Breaks Reverse Many Changes Made by 2017 Tax Reform Law

Understanding that businesses are struggling in this new climate, the CARES Act aims to change or reverse some of the changes from 2017.  One of these changes that the CARES Act affects is the changes to net operating loss that were made in 2017, now allowing these losses to be carried for up to five years from only two years, as well as halting the 80% taxable income limit.

Claims on interest limit from business debt have changed from a 30% capped limit of adjusted taxable income to a 50% limit.  Interest expenses that do not allow for a deduction in the current year can be carried forward to the following year.  The 2017 tax reform law capped deductions for business losses at $500,000 for those filing jointly, and $250,000 for single filers.  The CARES Act suspends this loss limitation rule.

Businesses can take advantage of the many tax breaks allowed under the CARES Act.  In the case of the Amherst business owner, Merrimack Tax Associates was able to work with him to help find the most advantageous tax strategy under these new laws.