Tax Filing Changes Minnesotans are Seeing for 2013

Published On: 14th March 2014

From the internet

Something about the tax code changes every year, it seems. These codes change based on the needs of the federal government or Minnesota. Due to Minnesota not conforming with the federal tax code, there are some tax breaks that individuals are missing out on, such as those breaks that are received when employers help pay for education or adoption or the fact that Minnesota is no longer recognizing the fact that short selling a home is not considered income.

When the codes change, income tax procedures change and that means things are going to be different for tax filers from year-to-year. The following are some of the changes for the 2013 tax year.

Business Equipment Deduction

The business equipment deduction has been a popular federal deduction, but it will be slashed for the 2014 tax year. For the 2013 tax year, businesses are able to deduct assets that the IRS defines as having a life of 20 years or less, such as parking lots and equipment. The amount that can be deducted is up to $500,000, but there are some exceptions. For the 2014 tax year, the amount reduces to just $25,000, although the cost of those assets may be much more than the amount that is allowed to be deducted.

In the past, the state would refrain from allowing larger depreciation on new equipment because the IRS was doing it during the economic downturn. Nonetheless, this is a deduction that can save a small business a great deal of tax money so they can put their profits back into their business equipment.

Agriculture And Manufacturing Exemption

If anyone in Minnesota has any agriculture and manufacturing interests in Wisconsin, they will be phasing in an exemption from income tax for some of the manufacturing and agricultural businesses this year. This exemption targets manufacturers and small dairy farms. The purpose is to help those businesses compete with the larger corporations, as well as hire more people to work for them.

Entrepreneurial Tax Credits

Minnesota businesses will be able to receive a tax credit for research activities. An unused credit can be carried forward for 15 years. In 2013, eligibility was expanded for the angel investment credit.

Home Office Deduction

At one time, the IRS was very strict with its rules regarding home offices, requiring a separate room be used in the home just for the home office purpose. This hurt some businesses, such as the plumber who worked out of his home, farmers, and day care centers.

The new “safe harbor” rule by the IRS allows for a $5 per square foot deduction or $1,500 for the total area that is used mainly for business. The square foot maximum is 300 square feet.

This helps the smaller businesses, but those with a larger footprint in their home may not benefit much from the deduction.

Mileage Deductions

The IRS has dropped the business mileage deduction from 56.5 cents to 56 cents.

Student Loan Interest

The IRS has clarified the deductibility of student loan interest. If a student loan is over five years old, it can no longer be deducted. There are questions as to how the IRS is going to track the age of a student loan.