Here are the small business payroll tax and other business tax changes in effect for 2012 that you need to know about.
The IRS standard mileage rate has changed for 2012. Here are the rates:
- 55.5 cents per mile for business miles driven
- 23 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations.
These rates are in effect for the entire year for businesses taking the standard mileage deduction.
Payroll taxes, including FICA taxes (Social Security and Medicare) and self-employment taxes
, were cut by 2% (the Social Security portion) to help stimulate the economy. This tax cut expired December 31, 2012. There is nothing you need to do about this cut; your tax software or your tax preparer should calculate your self-employment tax based on the 2% reduction.
The tax rate for Social Security remains the same but the maximum deduction has been increased for 2012, to $110,100. The Social Security portion of your self-employment tax stops when your income reaches this amount; the Medicare tax continues for all income.
If you have self-employment income, then you can take a deduction for health insurance expenses incurred for yourself, your spouse, and your dependents. There are restrictions on who can claim this deduction and types of insurance that qualify for the deduction. Also read about how to claim the deduction.