How Small Businesses Will Benefit from Recent Tax Cuts

Established in 2012, Prime Corporate Services offers comprehensive financial consulting to large and small businesses. On the economic and regulatory front, Prime corporate Services advises businesses on tax code changes. 

The recent passage of the Tax Cuts and Jobs Act by both houses and its signing into law by President Donald Trump has heralded a significant break for small businesses. One of the key features of the act is the 20 percent deduction for business incomes made by qualified pass-through entities such as limited liability companies (LLCs) and S corporations. 

Small business owners with qualifying entities will benefit from a 20 percent deduction of their total taxable income, leaving only 80 percent liable to taxation. Small business owners can use the additional liquidity to expand their operations, purchase new equipment, or give employees bonuses. However, the deduction does not automatically pass to all small businesses. 

According to the act, all businesses with a taxable income below $157,500 if the owner is filing as a single person, and $315,000 if filing as a couple, qualify. Businesses with taxable incomes above those thresholds can still claim the deduction as long as they are not professional service firms offering legal, medical, or financial services.