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Under the 2018 Tax Cuts and Jobs Act, small businesses and large corporations are set to see a number of important changes. Signed in December 2017, proponents say the new tax planning law is designed to help companies grow revenue, increase hiring, and reduce taxable income. Advocates say firms can expect changes to their bottom lines as soon as the first quarter of 2018.

The Impact of the 2018 Tax Cuts & Jobs Act on Small Businesses

Lower Corporate Tax Rate

The new law reduces the corporate tax rate from 35% to 21%. Small businesses poised for growth may benefit from the reduction because it’s supposed to free up more capital. Some contend the new rate will likely benefit larger, multi-million dollar corporations. This additional income can potentially be used to expand operations, hire more employees, and revamp existing tax planning goals to accommodate more growth strategies.

New Pass-Through Deduction

tax planningPartnerships, sole proprietorships, and S corporations are a few examples of pass-through businesses. Under the 2018 Tax Cuts and Job Acts, these types of firms are eligible for a new deduction that potentially reduces their taxable income by 20%. Like the corporate tax rate cut, the hope is that the pass-through deduction will provide additional income for small businesses to grow their operations. The one exception to the rule is married couples who own service-based firms. According to the law, their annual income must be under $315,000 to claim the deduction.

Eliminates Several Business Deductions

The new law eliminates several common deductions claimed by small businesses. These include expenses to accommodate disabled persons, restaurant employee tips, and employer-provided child care. There are also a number of tax credits that have been eliminated, such as the Work Opportunity Tax Credit and the New Markets Tax Credit.

 

Small business owners may be wondering about the full impact of the 2018 Tax Cuts and Jobs Act on their operations. The knowledgeable team at Wilson, Rea, Beckel & Associates CPAs LLC in Pagosa Springs, CO, s your trusted source to help decipher the new law. To schedule a time to talk with one of the tax planning specialists, call (970) 731-1040 or (318) 673-8441 at its Shreveport, LA, office. Visit the website for extensive details about the agency's lineup of services.

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