The Tax Cuts and Jobs Act – which President Trump signed into law last week – delivers a tax code that will help small businesses grow, hire, and invest in our communities. Among other historic provisions, this law offers a first-ever small business tax deduction of 20 percent to support our Main Street job creators and the millions of Americans they employ.
Here’s how this new, pro-growth deduction works and how it will help America’s small businesses grow their operations, create jobs, and increase paychecks.
How it works:
The way this historic new deduction works is simple. For pass-through business income of up to $315,000, the business owner can deduct 20 percent from their taxes. So, at this income level, that means $63,000 is protected from taxes and can instead be used for the needs of the business and its workers.
For business owners with income above this level, the 20 percent deduction is available if they meet straightforward criteria based on either wages paid or capital invested in the business. In combination with the lower tax rates for individuals delivered by the new law, this deduction reduces the effective tax rate for small businesses to no more than 29.6 percent – 10 percentage points lower than the old, broken tax code.
It’s important to note that these tough but fair safeguards make sure this historic new tax relief goes to the local job creators it is designed to help. For example, people will not be able to use this tax benefit to reduce the tax rate on their wage income.
How this will help America’s small businesses and workers:
Whether a small business is just starting up with three workers or if they’re an established company with many more, the ability of businesses to keep more income to use as they see fit is crucial to success and growth.
As leading small business groups explain, this historic new deduction and the numerous other pro-growth features of the Tax Cuts and Jobs Act will help our nation’s small businesses significantly:
“Tax relief is the number-one priority for small businesses, which represent half the economy and half the GDP. This bill will allow millions of small business owners to keep and reinvest more of their money, so they can grow and create jobs.”
“This historic tax relief bill is a powerful measure that will fuel economic growth, boost entrepreneurship and encourage small business success…. Entrepreneurs and small business owners are optimistic about their prospects for growth, and look forward to benefitting from key tax changes that support their risk-taking and big goals for 2018.”
The Tax Cuts and Jobs Act recognizes that starting and growing a small business in America can be incredibly difficult. With President Trump officially signing the bill into law last week, our nation is just days away from a new tax code that includes historic new tax relief to help Main Street job creators and workers across the country.
CLICK HERE to learn more about the Tax Cuts and Jobs Act.
CLICK HERE to see what other job creators and business leaders are saying about the Tax Cuts and Jobs Act.