Get Even More Visitors To Your Blog, Upgrade To A Business Listing >>

Small Business Outlook on the Tax Plan: What Does It Mean for You?

Small Business Outlook On The Tax Plan: What Does It Mean For You?

As the New Year is upon us, we are going to see changes to the current US tax structure. The Republican Tax Plan was signed off by President Donald Trump on December 22, 2017, and is on its way to the IRS to start drafting up regulations. You probably have a lot of questions about this plan. What is the Tax Plan? How will it affect small businesses? Will it have any effect on future incorporations?

What is the Republican Tax Plan?

The Republican Tax Plan aims to build up the American economy by lowering taxes for families and businesses. With the cut in tax rates, the new tax law aims to encourage businesses to increase wages and supply more jobs, which should, in turn, spur economic growth in the US. The plan will take effect January 1, 2018, and will govern taxes filed for the 2018 tax year. It will not affect income taxes that will be filed in April 2018, since those are for the 2017 tax year.

How will the Tax Plan affect businesses?

Lower corporate rates

The new plan will be changing the federal corporate tax rate for C-Corporations, which currently ranges from 15-35 percent to a flat 21 percent rate. C-Corporations will generally have a higher tax burden than pass-through entities, like LLCs, but if you are considering incorporating or changing business entities, it is important to talk to a business Lawyer about the best option for you.

20% tax deduction for pass-through income

Small business owners of sole proprietorships, LLCs, S-Corps, and partnerships, who are paying a share of the business’ taxes through their own individual tax returns may be eligible for a 20 percent deduction. However, there are limits for high-earners and people in the professional services industry. There are also a number of factors that determine one’s eligibility for the maximum deduction, so it is important to discuss your specific situation with an accountant or tax attorney.

New expensing rules

According to the IRS, business expenses are the cost of carrying on a trade or business. The new expensing rules will allow businesses to write off new equipment they purchase immediately, rather than writing off the cost over a series of years. This is an increase from the current 50 percent cap. The immediate write-off will only be available until 2022. After 2022, the cap will decrease by 20 percentage points each year until 2027. The tax plan will also increase the Section 179 expensing maximum from $510,000 for the 2017 tax year to $1 million for the 2018 tax year. A tax professional can help you determine what qualifies as an eligible business expense.

Small business outlook: Optimistic

It appears that people are optimistic about the new plan and believe it will help to build economic growth over the years. In a recent survey that we conducted of small and medium-sized businesses, 12% of US adults reported that they plan on incorporating to take advantage of the new tax laws. This amounts to 25-35 million individuals, which is more than the total number of people alive today who have incorporated in the US!

Power up your business

We make it easy to incorporate with step-by-step guidance

Incorporate Now

If you are interested in starting your incorporation process, Rocket Lawyer is here for you. Our business specialists have helped thousands of people start and run their companies. From choosing a business entity to filing your incorporation documents and defining your operating procedures in the form of an LLC Operating Agreement or Corporate Bylaws, we’re there to help every step of the way.

If you still have questions regarding incorporation or how the new tax plan is going to affect your business, you can always ask a lawyer a question.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

The post Small Business Outlook on the Tax Plan: What Does It Mean for You? appeared first on Rocket Lawyer.

This post first appeared on Rocket Lawyer - Everyday Law, please read the originial post: here

Share the post

Small Business Outlook on the Tax Plan: What Does It Mean for You?


Subscribe to Rocket Lawyer - Everyday Law

Get updates delivered right to your inbox!

Thank you for your subscription