Small business owners are used to wearing many hats. When you don’t have the resources of a big company, you wind up having to learn many different skills to keep the business alive & growing. Unfortunately, tax codes aren’t something that you can just pick up on-the-go; they’re complicated, time consuming, and constantly changing, This is especially true during times of shifting political landscapes, which we are currently facing. Bowman & Company LLP Senior Manager Dave Evans recently spoke to an audience at the Burlington County Economic Development Authority on tax matters and regulations, and how they are changing this year and beyond.

There are many significant tax proposals from the federal government that could affect both your business as well as you individually. Some of the main objectives of the current administration’s policy goals, regarding businesses, will be to:

• Extend the expiration date of the 2017 Tax Cuts and Jobs Act (TCJA) provisions, or make them permanent, except allowing deduction for SALT
• Reduce corporate tax rate from 21% to 20%, or as low as 15% for domestic production businesses
• Keep QBI deduction for pass-through entities and individuals
• Make bonus depreciation permanent at 100%
  • Currently it reduces to 60% for 2024, and 40% for 2025. You can use Sec. 179 instead to get 100% deduction under certain circumstances
• Expense R&D costs instead of amortizing
• Reduce or repeal some other green energy credits (applied to business as well as individuals)
• Increase tariffs on imported goods to 20% (as high as 60% for Chinese imports)

For policy regarding individuals, the federal government intends to:

• Exempt Social Security income, tip income, and overtime income
• Create an itemized deduction for auto loan interest
• Increase child tax credit to $5,000, from current $2,000
• Repeal EV credit
• Standard deduction increase to $15,000 (filing single) or $30,000 (married filing jointly)
• Capital gains tax is 0% if income is less than $48,350 (single) or $96,700 (MFJ)
• Gift exclusion increased to $19,000
• Minor adjustments for inflation, including to the tax bracket thresholds, Health FSA limits, premium tax credits, earned income tax credit (EITC), and more

Some of the recently proposed tax & economic changes are not so clear in how they will be implemented. For instance, the federal government has suggested they will eliminate taxes on tipped income; however, no one knows whether that will apply to income tax, payroll tax, or both. Additionally, tariffs on imported goods may vary depending on the political relations between other countries and the United States.

Bowman & Company LLP’s tax team is not only up-to-date on regulatory changes, but we know how to apply them to best suit your goals and interests. For tax inquiries, IRS resolution matters, or small business related questions, contact Dave Evans.