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The New Tax Law and
Small Business

On December 20 of last year, the most significant overhaul of the tax code since 1986 was passed by Congress and the president signed it two days later. Since then a growing list of companies have pledged to give employee bonuses, pay hikes, 401(k)-match increases and charitable donations as a result of the reduction in the corporate tax rate from one of the highest in the world (35%) to 21%. The pledged bonuses and other increases in compensation amount to billions of dollars being received by 2 million American workers.

The stock market has been setting almost daily records since the 2016 election in anticipation of exactly this kind of legislation and, after two consecutive quarters of 3% growth, some estimates state that Gross Domestic Product (GDP) may hit 4% for the first time since 2000.

All this exhuberance is largely because of the rate reduction for corporations, which is to say "C Corps", which is what the large businesses usually are. Most small businesses, on the other hand, are usually "S Corps" or LLCs. What does the tax bill mean for them?

For one thing, there will be no doing your business taxes on a postcard and you can't say goodbye to your CPA either. If anything the tax landscape is more complicated for small business than before, although reductions are still a possibility, depending on a lot of factors.

For instance, a small business owner's tax liability will depend on how much of the companies income is counted as salary to the owner(s) and how much is "pass-through" income. Pass-through income will get a 20% deduction, with limitations (which is why your CPA still matters). Salary paid to business owners is taxed separately according to new personal rates, the top rate having been reduced from 39.6% to 37%. The rules favor companies with a larger workforce and are seen as encouraging hiring.

Changes to the rules for expensing and depreciation of equipment should be very helpful to small business, with some deductions doubling or greatly accelerated.

Of course, this is all general information and your specific situation will determine your actual tax liablility.

NEW WHOLESALE WEBSITES

The Original Mermaid has a brand new, wholesale OmegaNet website. "Shimmers like a mermaid tail" is the tagline for this colorful line of jewelry, body-and-bath products, candles and clothing. The Original Mermaid^™ line can be found in over 100 stores nationwide.

Brazos Walking Sticks has a brand new wholesale CAMEO EZ^© website. The company is the largest hand-crafted American walking stick manufacturer in North America, sustainably sourcing 20 core species of wood from upstate NY to East Texas.

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