As the dust settles on the Tax Cuts and Jobs Act, you may be wondering what this means for your small business? Well, we have good news, some not so good news, and essential tax opportunities that you should consider. Learn how to maximize your small business tax saving to keeping growing your business and creating more jobs.
Although these changes will not apply to your current tax season they will next year.
How to Maximize Your Small Business Tax Savings
Tax Reform law and Your Small Businesses
For those of you with businesses organized as LLCs, partnerships, and most S Corporation this new law will provide a 20% deduction for qualified business income. In addition to the deduction, small businesses can benefit from a number of other provision including AMT and the reduction in rates. Congress has also expanded section 179(d) expenses from $500k to $1 million.
However, this law significantly cuts back certain state and local tax deductions. This includes mortgage debts, travel expenses, and other miscellaneous expenses. Manufacturing business will also notice the elimination of Section 199. The domestic production deduction was created by Congress in 2004 as a break for manufacturers based here in the US.
Opportunities to Maximize Tax Savings
While there are some tax deduction losses, the new tax reform bill does provide a significant break for your small business. To ensure your small business maximizes its tax saving it is important to stay updated on new developments. The tax bill eliminates a number of incentives and credits, but it also added and kept in place several important ones.
Research and Development (R&D) Tax Credit
The Federal R&D Tax Credit is a tax deduction for small business owners to help offset the cost of research and development. Small businesses can claim a maximum of $250,000 per year and apply it to their Social Security Taxes.
For your small business to qualify you must meet the following requirements:
- Less than $5 million in revenue
- Qualified development and research costs
- Gross receipts for five years or less
Small business within the technology and science sector are more likely to use this new tax credit. However, small businesses within any industry can qualify if they are actively seeking and developing new products or manufacturing processes.
Exporter Incentives (IC-Disc)
Miracles do happen! The IC-Disc was on the chopping block, but Congress called it off. This export incentive primarily benefits small to medium size businesses. If your business exports any products or parts of products overseas, provides engineering/architectural work, sells software outside the US the IC-Disc is potentially a major tax break.
Getting Your Money’s Worth
Here at PayWow we understand the complexity of processing payroll and trying to manage the day to day business. This is failing to mention the ever-changing political and tax policy scene. Which is why we strive to simplify your payroll needs with our innovative payroll software solution. Utilize our informative payroll blogs to read the latest payroll news and information.
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