There are some people that praise president Trump’s tax reform and others that say it has too many loopholes. The truth is, in a partisan society, many people want to know how it will help the people. On December 22, 2017, Trump signed the Tax Cuts and Jobs Act. There have been some benefits from the new legislation, but other areas have seen political turmoil. There have been pros and cons with the signing of the Tax Reform Bill. Many key players in Congress see it as a landmark bill that will ultimately benefit millions of Americans. Read more details below on the pros and cons of the Tax Reform Bill.
How Tax Reform Helps Small Businesses
The first question is how will the Trump Tax Reform affect your small business based on the way it’s structured? The benefits and difficulties of the tax reform will affect your business based on the individual being a sole proprietorship, C-Corporation, LLC, etc. For example, a C-Corporation will be taxed at a corporate level. They can be held legally liable as an individual entity. Plus, as a personal taxpayer, this is true when their income is paid out to their stockholders under the tax reform law.
On the other hand, a sole proprietorship and a C-Corporation have different deductions that will apply to their taxes. The deductions will bring on a slew of new benefits for your small business. Establish the structure of your business entity to get the most out of your taxes. In fact, the goal is to help small businesses narrow their tax burden. Small businesses with their income intertwined into their corporation will benefit the most. More importantly, a business that files as a pass-through will have a 20 percent business income deduction. The pass-through deduction is one of the better tax opportunities for small businesses.
You will also be able to deduct large equipment purchases for your business over a number of years. For example, if your car is part of your business, you will be able to write it off over a number of years until you stop using it. The business depreciation deduction for new equipment can be claimed up to $1 million dollars. You will be able to write-off 100 percent of your new equipment up to 5 years. This is one of the bigger deductions available for small businesses. This is even true for real estate that you’ve acquired in 2017.
The Cons Of The Trump Tax Reform
Trump supporters believe the tax reform will strengthen the middle class and improve small businesses. However, the tax reform comes with the good, the bad, and the ugly. President Trump believed a change in the tax system would help many small businesses. Does the good outweigh the bad? The Child Tax Credit has been eliminated, but provisions have been made to help more families wipe out more of their tax debt. Under the new reformed Trump bill, you may be eligible for $2,000.
Filing your taxes can be very difficult and require the help of a tax professional to avoid penalties. You should start early by reading more information about the 2017 tax reform. For example, the Child And Dependent Tax Credit can be more complex. Plus, the head of the household will receive more credits under the bill. You should always make sure you get help with exemptions, deductions, and credits that you don’t understand. Another con is small businesses will only be able to deduct 30 percent of their small business loan interest, which is way down from previous years.
The Trump reform does have many benefits and a few downfalls for a few taxpayers. You should thoroughly assess the tax code to protect your personal and small business interests. A single mother working full or part-time will have some form of relief when it comes to filing her taxes for the upcoming year. The tax reform will help you retain the jobs of your workers when your small business is struggling. Tax software will also help you calculate what your business can deduct and claim. You can use this software technology to adequately see what you qualify for under the Trump Tax Reform Bill.