Written by Senior Planner, J. Bradford Flecke, JD, CFP®
Florida is a top relocation choice for US and foreign businesses: no winter slowdown, great leisure opportunities, a generally business-friendly environment, and no personal income tax. Canadian entrepreneurs interested in Florida should be aware of the following tax changes:
- For tax years beginning on or after January 1, 2012, the Florida corporate income tax exemption is increased from $5,000 to $25,000. No tax on the first $25,000 of otherwise taxable income should be good news for small businesses and startups. Note that a Florida corporate tax return must still be timely filed.
- For 2011 and 2012, Florida has extended the rule that allows businesses to, in effect, deduct from state taxable income over seven years the federal special bonus depreciation and federal Section 179 expense amounts, rather than adopting the new federal special bonus depreciation and expensing provisions. Corporate taxpayers will continue to add these items back to adjusted federal income but then will be allowed to subtract those amounts in equal increments over a seven year period:
– The special 50 percent bonus depreciation for assets placed in service between January 1, 2010 and September 8, 2010.
– The 100 percent bonus depreciation for assets placed in service after September 8, 2010 and before December 31, 2011.
– The 50 percent bonus depreciation for assets placed in service in 2012.
– All amounts in excess of $250,000 of Section 179 expensed for the tax year beginning 2010.
– All amounts in excess of $128,000 of Section 179 expensed for the tax year beginning 2011.
- For tax years beginning on or after January 1, 2012, Florida corporations that claim the federal credit for qualified research expenses will also be allowed a credit against Florida income tax. That credit will be equal to 10% of the qualified research expense amount over the average Florida qualified research expenses allowed for the previous four tax years. The credit cannot exceed half of the net corporate income tax liability after claiming all other credits—unused credit may be carried forward up to five years. Maximum credit is $9 million per year.
- For tax years beginning on or after January 1, 2012, the emergency excise tax on corporations doing business in Florida is repealed.
Like many states, Florida adopts the current federal tax code every year, making business tax planning simpler. However, that adoption of the federal tax code is not wholesale. Florida may (and does) choose not to adopt specific federal provisions—sometimes for local political reasons but more often to achieve year-over-year consistency in state rules.