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For small business owners, the recent changes to tax laws in the United States have been both significant and wide-ranging. These changes can have a big impact on how businesses operate, how much money they make, and how they pay taxes. In this article, we’ll take a look at the impact of recent changes to tax laws on small businesses in the United States. We’ll explore the implications for business owners, the effects on their bottom line, and the potential opportunities that these changes may provide.
The Tax Cuts & Jobs Act of 2017
The most significant recent change to tax laws came in the form of the Tax Cuts & Jobs Act of 2017. This act made sweeping changes to the US tax code, including reducing the corporate tax rate from 35% to 21%, and introducing a number of credits and deductions for businesses. For small businesses, the Act provides a number of benefits, including:
• Lower corporate tax rate: The lower corporate tax rate of 21% has provided small businesses with a substantial tax advantage. The new rate is significantly lower than the previous 35% rate, providing businesses with more money to reinvest in their operations.
• Increased section 179 deduction: The Section 179 deduction allows businesses to immediately deduct up to $1 million of certain capital purchases, such as machinery, equipment, and furniture. This deduction has been increased to $1.04 million under the new tax law, providing small businesses with more tax savings.
• Increased bonus depreciation: The bonus depreciation deduction allows businesses to immediately deduct the cost of certain qualified property placed in service. This deduction has been increased to 100% for qualified property purchased and placed in service after September 27, 2017.
• New 20% pass-through deduction: The Tax Cuts & Jobs Act also introduced a new 20% deduction for certain “pass-through” entities, such as sole proprietorships, partnerships, and S corporations. This deduction is available for businesses with taxable income of up to $157,500 for single filers and $315,000 for joint filers.
These changes are expected to have a significant impact on small businesses in the US.
Impact on Small Businesses
The changes to the US tax code have had a significant impact on small businesses in the United States. Business owners can take advantage of the lower corporate tax rate, increased deductions, and new pass-through deduction to help reduce their tax liability. This can result in increased profits and more money to reinvest in their operations.
The changes also provide businesses with greater flexibility when it comes to structuring their operations. For example, businesses can choose to operate as a C corporation or as a pass-through entity to take advantage of the new deductions. This can allow businesses to maximize their profits and minimize their tax liability.
In addition, the changes have had an impact on how businesses finance their operations. The lower corporate tax rate has made it more attractive for businesses to take on debt financing, as the interest payments on loans are now tax deductible. This can provide businesses with additional capital to invest in expansion and growth.
The recent changes to tax laws in the United States have had a significant impact on small businesses. The lower corporate tax rate, increased deductions, and new pass-through deduction have provided businesses with greater tax savings and flexibility. These changes have also made it more attractive for businesses to take on debt financing, enabling them to access additional capital to reinvest in their operations. For small business owners, these changes can have a big impact on how they operate and how much money they make.