We're half way through the tax year and summer is a great time for small businesses to get a jump-start on tax planning. Now that the dust from the Protecting Americans from Tax Hikes (PATH) Act of 2015 has settled, small business owners can plan ahead with these five mid-year tax strategies inspired by the recent legislation.

Tax Strategy #1: Purchase the Equipment You've Been Thinking About Investing In

The PATH Act of 2015 increases preserve both the generous limits for the Section 179 expensing election and the availability of bonus depreciation. These breaks generally apply to qualified fixed assets, including equipment or machinery, placed in service during the year. For 2016, the maximum Sec. 179 deduction is $500,000.  Bonus depreciation can be claimed on 50% of the purchase price of qualified assets.

Tax Strategy #2: Improve Your Premises

Traditionally, businesses must recover the cost of building improvements straight-line over 39 years. But the recovery period has been reduced to 15 years for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements. This tax break was reinstated and made permanent by the PATH Act.  If you qualify, you could recoup the costs much faster than you could without this special provision.

Tax Strategy #3: Ramp Up Research Activities

After years of uncertainty, the research credit has been made permanent under the PATH Act. For qualified research expenses, the credit is generally equal to 20% of expenses over a base amount that's essentially determined using a historical average of research expenses as a percentage of revenues.

Effective starting in 2016, a small business with $50 million or less in gross receipts may claim the credit against its alternative minimum tax (AMT) liability. In addition, 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.

Tax Strategy #4: Offer More Stock

Does your business need an influx of capital? If so, consider issuing qualified small business stock (QSBS). As long as certain requirements are met (for example, at least 80% of your corporate assets must be actively used for business purposes) and the investor holds the stock for at least five years, 100% of the gain from a subsequent sale of QSBS will be tax-free to the investor — making such stock an attractive investment opportunity. The PATH Act lifted the QSBS acquisition deadline (December 31, 2014) for this tax break, essentially making the break permanent.

Tax Strategy #5: Hire Workers From Certain Target Groups

Your business may claim the Work Opportunity credit for hiring a worker from one of several "target groups," such as food stamp recipients and certain veterans. The PATH Act revives the credit and extends it through 2019.

Generally, the maximum Work Opportunity credit is $2,400 per worker, but it's higher for workers from certain target groups. In addition, an employer may qualify for a special credit, with a maximum of up to $1,200 per worker for 2016, for employing disadvantaged youths from Empowerment Zones or Enterprise Communities during the summer.

New transitional rules give an employer until June 30, 2016, to claim the Work Opportunity credit for applicable wages paid in 2015.

Need to Know More About Midyear Tax Planning?

Need help estimating your expected tax liability based on year-to-date taxable income and devising ways to reduce your tax bill in 2016 and beyond? PDM's tax experts can help advise you on the best course of action. Contact us; with our years of technical experience, advanced training, and cutting edge technology, we are your financial partner.