For small business owners, Halloween is frightening for a couple of reasons: October 31 is the day you admit to yourself that you can no longer put off year-end planning or your taxes. This year, it’s even more frightening because several business deductions are set to expire on December 31 unless Congress can agree to extend them. And yes, that’s the same Congress than can’t seem to agree on anything.

From SBA.gov and lawyer-author Barbara Weltman (@BarbaraWeltman), here are five tax breaks that are scheduled to end on December 31 unless Congress (boo!) extends them.

(As with any type of tax or legal issue, don’t believe what you read on the internet, even here. Your circumstances can be unique, so check in with your legal, accounting and financial advisors before doing any of the following.)

1. Faster write-offs for purchasing certain types of equipment

early industrial machinery

(Photo: Galdabini)

Currently (as of October 2013) instead of depreciating the cost over several years, you can deduct up to $500,000 of the cost of certain equipment like computers and production machinery (whether new or pre-owned) as long as you’re profitable. Next year, the deduction limit is scheduled to be $25,000. Also, you can currently deduct 50 percent of the cost of new qualified equipment, even if it adds to or creates a business loss. Next year, this deduction is set to disappear entirely.

2. Faster write-offs for improving your facilities

wholesale office

(Photo: Wikipedia Commons)

Capital improvements to your workspace can only be depreciated over a period of 39 years unless you take advantage of some of these set-to-expire breaks. (And hurry, they must be completed by year’s end if Congress doesn’t act.) However, for improvements to leaseholds (by the lessor, lessee or subleasee), restaurants and retail establishments, you can use any or all of the following rules as long as the improvements are completed before the end of this year:

  • $250,000 first-year expensing for eligible improvements
  • 50 percent bonus depreciation for eligible improvements
  • 15-year amortization period for any costs not deducted with first-year expensing or bonus depreciation

More details: IRS Publication 946 (PDF)

3. Tax credits for hiring certain workers

Hine Girl

(Photo: U.S. Department of Commerce and Labor, Children’s Bureau, via: Argent Editions)

Hiring from certain targeted groups may entitle you to a tax credit that can be used to offset your tax bill, but this credit is set to end this year. The amount of each credit and eligibility rules vary, but each requires that you hire an eligible employee before the end of this year.

  • Work opportunity credit for hiring certain disadvantaged workers, including certain veterans. (You must submit IRS Form 8850 PDF to your state work force agency to get eligible workers certified as entitling you to the credit.)
  • Indian employment credit if you hire an enrolled member, or spouse of an enrolled member, of an Indian tribe who performs services within an Indian reservation.
  • Empowerment employment credit if your business is located within a federally designated empowerment zone.

4. Exclusion for gain on certain stock

stock board 1918-19

(Photo: US National Archives)

This is a high technical and narrowly focused tax break, so don’t try it at home without lots of legal and accounting eyes looking over your shoulder. If your business is a C corporation involved in technology, manufacturing, retail or wholesale and is seeking new investors, you may consider issuing new stock before the end of the year. If the stock meets the definition of qualified small business stock (PDF) and investors hold it for more than five years, then all of their gain will be tax free. Stock issued next year will give investors only a 50 percent exclusion for their gain unless the current 100 percent exclusion is extended. You can also issue qualified small business stock to employees as payment for services (i.e., year-end bonuses) to enable them to reap tax-free returns. (Like we said, get with your lawyers and financial advisors.)

5. Tax credit for doing research

edison in labratory

(Photo: Wikipedia Commons)

If your company does research to create a new product, you may be eligible for a tax credit of up to 20 percent of increased research expenses. It also applies to research for internal processes (e.g., internal use software) that improve your business operations. (Details can be found on IRS Form 6765 PDF).

(Featured Image: Wikipedia)

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