The new tax reform laws are complex and can be difficult to understand. For small business owners, this means navigating a complicated system of filing taxes that has likely changed from previous years. To make sure your business is up to date with the latest tax regulations, here’s an overview of what you need to know about the current tax reform laws.
The Basics of Tax Reform for Small Businesses
Under the new tax reform law, small businesses are now eligible for a 20% deduction on qualified business income (QBI). This deduction applies to single-member LLCs, sole proprietorships, partnerships, and S corporations that meet certain criteria. It’s important to note that this deduction is limited if your income exceeds $157,500 as a single filer or $315,000 as a married couple filing jointly. In addition to the QBI deduction, the new law also provides an increased deduction for start-up costs incurred after September 27th of 2017.
The Benefits of Tax Reform
Tax reform provides several benefits to small businesses. One major benefit is a decrease in overall taxes and more money retained by businesses. With the increase in deductions and credits allowed under the new law, many small businesses will pay fewer taxes than before. In addition to lower taxes, there are also several other advantages including increased deductions for capital investments such as equipment and machinery used in your business operations as well as expanded opportunities for retirement savings plans like SEP IRAs and SIMPLE IRAs that allow you to save more money for retirement while reducing your taxable income.
Another advantage of tax reform is that it simplifies filing procedures by reducing paperwork and allowing you to file electronically instead of mailing paper forms. Additionally, it eliminates some reporting requirements which can help streamline processes and help reduce audit risk due to incomplete filings or incorrect information reported on returns. Ultimately, these changes should make filing easier and less time consuming so you can focus on running your business.
Tax reform can be overwhelming but understanding how it affects your small business is essential in order to stay compliant with current regulations while taking full advantage of available credits and deductions that can benefit your bottom line. The team at BFG Tax Help has years of experience helping clients navigate through their tax returns each year so they get maximum savings from every dollar spent on their taxes! Contact us today so we can discuss how we can help simplify tax reform for you!