New Tax Laws Impacting Small Businesses

A number of changes to the federal tax code have come into effect over the past months to assist startups and small businesses. Among these new laws are: – A number of tax cuts in the Small Business Jobs Act, including permitting self-employed entrepreneurs to deduct their health insurance costs when calculating their self-employment tax – In the Affordable Care Act, for businesses with less than 25 full-time employees that provides health insurance, a tax credit of up to 35% (50% next year) of the cost of insurance – Tax incentives (including payroll tax exemption and general tax credits) for businesses that employ workers who have been unemployed for an extended period of time. – Tax credits for hiring military veterans and workers in underserved communities. The House Ways and Means Committee is also considering a proposal with a number of changes to the tax laws: 1) to make the Section 179 deduction — the deduction for equipment expenses up to $250,000 with a phase-out at $800,000 — permanent; 2) double the maximum deduction for startup costs from $5,000 to $10,000, with a phase-out at $60,000; 3) allow small businesses with gross receipts less than $10 million to use the cash accounting method (all sole proprietors, regardless of gross receipts, will also be allowed to use cash accounting); 4) extend the due dates for tax returns for small businesses.

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