Trump Signs Tax Reform Bill | Big News for Small Businesses
On Dec. 22, 2017, the Tax Cuts and Jobs Act was signed by President Trump after passing the House and Senate on Dec. 20. The tax reform bill is the most substantial overhaul of America’s tax system in decades and brings BIG news for small businesses in regards to federal tax code.
- Starting in 2018, the corporate tax rate will be lowered to 21% (down from 35 percent) and the corporate Alternative Minimum Tax (AMT) will be kicked out.
- For businesses conducted as sole proprietorships, partnerships, LLCs and S corporations, the bill creates a new 20% tax deduction.
- The bill allows immediate “expensing” of capital investments.
- Because the bill reduces the tax rate for all businesses, it also eliminates domestic production (Section 199) deduction, and abolishes many other exclusions and deductions such as those for employer provided transportation and community benefits. (Note: Business credits related to research and development and low-income housing as well as deductions or exclusions for employer provided dependent care assistant programs (DCAPs), education assistance programs and adoption assistance programs are preserved by the bill.)
- “Offshoring” incentives will end: The idea imposes a one-time, low tax rate on wealth that has already accumulated overseas so there is no tax incentive to keep the money off shore.
- The bill repeals the individual mandate tax penalty imposed under the Affordable Care Act.
For more information: 2017 tax act (H.R.1)