New taxes for businesses and changes for this year
The IRS standard mileage rate has changed for 2014. Here are the rates:
•56 cents per mile for business miles driven
•23.5 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.
Businesses may decide to deduct mileage using either the standard mileage rate or actual expenses. If you drive less than 50% for business, you probably want to use the standard rate, but if you drive over 50% for business, adding actual expenses might be better
The tax rate for Social Security remains the same but the maximum deduction has been increased for 2014, to $117,000. This maximum affects employees and it also affects small business owners who must pay self employment tax
Beginning with tax year 2013, an additional Medicare tax rate of 0.9% is applied to combined employment income and self-employment income above these levels:
•Married filing jointly – $250,000
•Married filing separately – $125,000
•Single – $200,000
•Head of household (with qualifying person) – $200,000
•Qualifying widow(er) with dependent child – $200,000
This additional tax must be withheld from employee pay above $200,000. For self-employed business owners, this additional Medicare tax is included in self-employment tax calculations.
In addition, also beginning with the 2013 tax year, a net investment income tax of 3.8% on investment income is imposed on higher income individuals, including business owners.