3 Overlooked Small Business Tax Deductions

The new year and the re-election of President Barack Obama brought about a small shift in the economy and in the playing field for small businesses. This year, with the recent fiscal cliff talks, there were some changes made to the taxation of small businesses.

As tax season is upon us, it's a good time to discuss some of these changes.

Here are three overlooked business tax breaks you can claim when you file this year and next:

1. Section 179 depreciation deductions. The fiscal cliff legislation changed the maximum allowable depreciation deduction to $500,000. Without this change, taxpayers would be looking at a maximum deduction of only $25,000, according to Section179.org.

Depreciation deductions fall under Section 179 of the Tax Code, and allow eligible businesses to deduct the entire cost of their qualifying new and used assets in the year that the equipment was placed in service. As of now, this $500,000 cap is set to go back down for fiscal year 2014. So if you plan to put machinery or software into use, do it before the end of this year!

2. "Bonus" depreciation of new equipment. The new tax laws also extend the first-year 50% bonus depreciation for capital equipment purchases. The good news about bonus depreciation is that it can be taken by companies that will have a net loss for the tax year. It can't be taken on software or used equipment, though. Only new equipment.

And even better news about net operating loss (NOL) is that it can "carry back" into old tax years. So you can go back and recover some tax paid for previous years.

3. Qualified small business stock. If you had gains from Qualified Small Business Stock, then the 100% writeoff on those gains has been extended to the 2013 tax year. This is not a short-term gain type of deal -- you have to hold the stock for five years in order to qualify for this writeoff.

These tax breaks are temporary, and it's best to take advantage of these breaks this year. As you can see, claiming these deductions can get complicated, so you may want to consult an experienced tax lawyer near you.

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Related Resources:

• 5 overlooked tax breaks for small businesses (MarketWatch)
• Ten Ways to Lower Your Taxes (FindLaw)
• How to Deduct Coffee, Donuts as Biz Expenses (FindLaw's Free Enterprise)
• 5 Signs You Need a Tax Lawyer, Not a CPA (FindLaw's Free Enterprise)