The last major tax legislation that was recently signed into law still has a significant impact on tax planning for businesses. Here are three midyear tax planning strategies inspired by the Protecting Americans from Tax Hikes (PATH) Act.

1. Buy equipment. The PATH Act preserved the limits for the Section 179 expensing election and the availability of bonus depreciation. These breaks usually apply to qualified fixed assets, including equipment or machinery, placed in service during the year. For 2017, the maximum Sec. 179 deduction is $510,000, subject to a $2,030,000 phase-out threshold. Without the PATH Act, the 2017 limits would have been $25,000 and $200,000, respectively. Higher limits are now permanent and subject to inflation indexing.

Additionally, during 2017, your business may be able to claim 50% bonus depreciation for qualified costs in excess of what you expense under Sec. 179. Bonus depreciation is scheduled to be reduced to 40% in 2018 and 30% in 2019 before it is set to expire on December 31, 2019.

2. Ramp up research. The PATH Act finally made the research credit permanent. For qualified research expenses, the credit is often equal to 20% of expenses over a base amount that’s determined by using a historical average of research expenses as a percentage of revenues.

In addition, a small business with $50 million or less in gross receipts may claim the credit against its alternative minimum tax (AMT) liability. And, a start-up company with less than $5 million in gross receipts may claim the credit against up to $250,000 in employer Federal Insurance Contributions Act (FICA) taxes.

3. Hire workers from “target groups.” You may claim the Work Opportunity credit for hiring a worker from one of several “target groups,” such as food stamp recipients and certain protected veterans. The PATH Act extended the credit through 2019. It also added a new target group: long-term unemployment recipients.
Largely, the maximum Work Opportunity credit is $2,400 per worker. But it’s higher for workers from certain target groups, such as disabled veterans.

One last thing to keep in mind is although these tax breaks are “permanent,” this only means there no scheduled expiration date. Congress could still pass legislation any day that changes or eliminates “permanent” breaks.

But it’s unlikely any of the breaks discussed here would be eliminated or reduced for 2017. Contact your advisor to stay up to date on tax law changes and get a jump start on your 2017 tax planning.