Small Business Tax Facts

Myth vs. Fact

The Benefits of Tax Reform on Small Business

MYTH: Current tax reform proposals favor large corporations over small businesses.

FACT:

  • In many cases the current tax rate for small businesses is as high as 40%, but current proposals of the Tax Cuts and Jobs Act in the House and Senate cut the rate for S-Corps to as low as 25%. Overall, the U.S. economy will benefit when both corporations and small businesses get the tax cuts they deserve, as outlined in these proposals.

MYTH: Current proposals eliminate the deductions that most small business owners can take.

FACT:

  • Both the House and Senate bills expand Section 179, allowing small businesses to expense more in new equipment purchases. Current proposals raise deduction limits to $5 million, up from $500,000 for up to 5 years. This provision will encourage small-business owners to reinvest in and expand their businesses helping to create jobs and stimulate our economy in the long run.

MYTH: Current tax reform proposals don’t help level the playing field for small businesses.

FACT:

  • Current proposals of the Tax Cuts and Jobs Act in the House and Senate do in fact help to level the playing field for small businesses by cutting the tax rate to at least 25% allowing small-business owners to keep more profits at the end of each year.
    • For Example: The U.S. Senate Committee on Finance estimates a couple earning $100,000, with $60,000 from wages, $25,000 in compensation (from non-corporate business), and $15,000 in business income, will see a tax cut of more than $2,850.
  • The House Tax Cuts and Jobs Act’s proposed pass-through businesses tax rate of 25% is the lowest small business income tax rate since World War II.
  • Many small businesses are family run business and both proposals of The Tax Cuts and Jobs Act increase the child tax credit to $1,600 from $1,000 – helping families save more on child care. Both proposals break the marginal income tax brackets down, from four to seven – eliminating the 15 and 28% brackets and establishing expanded income thresholds at lower rates – helping small-business owners everywhere save more money.
  • The Senate proposal will generate roughly 925,000 new full-time equivalent jobs; increase after-tax incomes by 4.4% – giving families a significant boost in after-tax income by the end of the decade; raise the GDP by 3.7%; and result in 2.9 % higher wages.

Republicans and Democrats in Congress must work together to pass comprehensive tax reform. It’s time to Stop the Tax Attack