If you have a small business in Missouri and you create new jobs, you can take advantage of a significant deduction on your Missouri state income tax return starting in 2011. This is the Small Business Deduction for New Jobs, which took effect on January 1, 2011 and is currently scheduled to extend through December 31, 2014.
You can deduct $10,000 for each new job you create. And if you paid at least 50 percent of your employees’ health insurance premiums, you can deduct $20,000 for each new job created. You must have paid at least half the health insurance premiums for all your employees, not just new employees, to qualify for the higher deduction. As indicated by Chris Blank in an article for the News Tribune, the deduction could mean a tax reduction of $600 or $1,200 per job you create.
This deduction is available to small businesses that employ fewer than 50 full or part-time employees at all times during the year for which you are claiming the deduction. For this purpose, part-time employees are considered those who work less than 30 hours per week.
According to the Missouri Department of Revenue, if you create new jobs you can claim a deduction in the year each new employee completes at least 52 weeks of full-time employment. Full-time employment is defined as an average of at least 35 hours per week.
And to qualify for the deduction you must pay at least the county average wage or the state average wage if the county rate is higher than the state rate. You can find the county average wages on the Missouri Department of Economic Development website.
You could not claim the deduction for someone who has worked for your business during the 12 months prior to the creation of the new job.
This deduction is claimed on Form MO-NJD. You choose a comparison date to compare the number of full-time employees in the year you are claiming the deduction and the number in the preceding year. On your comparison date you may have employees who you hired in 2011 and are currently working but have not yet completed the 52 weeks required to claim the deduction. When those employees complete the 52 weeks in 2012, you could claim the deduction.
You can claim this deduction for new jobs if your business is a sole proprietorship, a C corporation, or an LLC treated as a corporation. If you are a sole proprietor, you would report the deduction on Form MO-1040. And if you have a C corporation or an LLC treated as a corporation you would report it in Form MO-1120.
Sources:
2011 Missouri Income Tax Reference Guide, Missouri Department of Revenue
Chris Blank, Missouri lawmakers approve bill to aid small businesses, NewsTribune.com
County Average Wages, Missouri Economic Research and Information Center
Form MO-NJD, Small Business Deduction for New Jobs Under Section 143.173, RSMO, Missouri Department of Revenue