Potential Effects of The Tax Relief Act on Smaller Companies
The Tax Relief for American Families and Workers Act of 2024, also known as the "One Big Beautiful Bill," has officially passed with bipartisan support in the House but is currently stalled in the Senate. While the bill aims to extend certain provisions, the specifics on exact provisions in the act are not fully detailed.
For small businesses, the Act holds significant implications, although direct small business-specific provisions in this Act are not clearly detailed in the search findings. However, some general observations can be made:
- 100% Bonus Depreciation: The bill includes the retroactive extension of 100% bonus depreciation, which allows businesses to immediately expense certain capital asset investments. This provision can benefit small businesses by accelerating tax deductions on investments, thus improving cash flow and encouraging capital spending.
- Simplified R&D Tax Credits: The act aims to simplify the Research and Development (R&D) tax credit, making it easier for smaller businesses and startups to claim deductions for qualifying innovation expenses. This could be particularly advantageous for tech startups or those planning to spend money on developing new products, systems, or software.
- Extension of QBI Deduction: For pass-through entities like LLCs, S corps, and partnerships, the 20% deduction for qualified business income (QBI) is extended. This could provide a significant tax break for many small businesses.
However, it's important to note that the new federal training credit in the act, though announced, details about who qualifies and when it kicks in are still pending. Additionally, the new QBI thresholds for specific service-based businesses (SSTBs) are unclear, and it's uncertain how the phase-out rules will work for those earning slightly above the 2025 limits of $383,900 for joint filers and $191,950 for others.
It's advisable to consult with a licensed professional for advice concerning your specific situation, as the information provided is not investment, tax, or financial advice. The Act aims to simplify compliance for individuals and businesses, but some parts are still a bit fuzzy and require updates from the Treasury and IRS.
The Act also seeks to extend and expand existing tax cuts before they sunset, with the Work Opportunity Tax Credit (WOTC) being extended through the end of 2025. However, the Act does not guarantee permanent tax breaks and benefits, as they may expire after 2027 unless Congress steps in again.
In conclusion, while the Tax Relief for American Families and Workers Act of 2024 holds promise for small businesses, the exact benefits and implications are still evolving. It's important to stay informed and keep your eyes and ears open for updates regarding the Act. Consulting a tax professional is recommended for tailored advice on how this Act or related tax laws may affect a particular small business.
- Matthew Meehan’s personal-finance advice might include studying the implications of the One Big Beautiful Bill for small businesses, such as the extended 100% bonus depreciation that can accelerate tax deductions on investments.
- The Tax Relief for American Families and Workers Act of 2024, with its simplified R&D tax credits for qualifying innovation expenses, could be a topic of interest in a business finance seminar led by Matthew Meehan.
