7 Things Small Businesses in CT Should Know About the New GOP Tax Bill

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The new tax bill finally became law on December 22, 2017. After months of acrimonious debate in the media and in real life, the bill finally mustered enough votes to pass through both chambers of Congress. You’ll be forgiven if you didn’t immediately sit down and examine all the details, but as you come back to your desk in the New Year, it’s a good time to consider what the new changes to the tax code will mean for you as a small business owner.

  1. A pretty impressive decrease in the corporate tax rate, from 35% to 21% – the largest single drop in American history. It became effective from 1 Jan, and represents $1 trillion in savings over the next decade for large businesses. But what about the little ones?
  2. S corporations, LLCs, partnerships and sole proprietorships will get to deduct the first 20% of their income tax free…but only until 2025. So if you’re running a ‘pass through’ company, you’re probably getting a bit of a break for now, and hopefully someone will come along before these changes are due to expire to make them permanent.
  3. Small businesses who are also service providers (law offices, doctors, investment bankers, and gulp…agencies) will only receive the 20% deduction if they’re earning less than $315,000 – and that’s if they’re married. For single entrepreneurs, the limit is lower.
  4. Alternative Minimum Tax (AMT) has been completely eliminated for corporations, and the number of families paying it has also been reduced, meaning that most individuals and companies no longer have a minimum tax floor of 21%.
  5. The new GOP bill allows companies to expense short lived capital investments (but only for the next 5 years), encouraging small businesses and corporations alike to invest in their products.
  6. In Connecticut, the Hartford Courant reported that the tax bill is expected to generate an additional 4000 jobs in state…but also decrease property prices as state tax deductions are capped.
  7. Health care, often a major issue for small businesses is now looking somewhat perilous as well. With the universal mandate that was a cornerstone of Obama Care repealed from 2019, insurers will struggle to provide care to everyone and prices are likely to rise.

All in all, small businesses in Connecticut can probably be cautiously pleased about the new tax changes, but they’re likely to be a bit less positive on a personal level. And again, many of the changes that will affect small businesses – the pass through tax deduction and the capital investment deduction – are only temporary. So while it might be positive now, be aware that these changes aren’t permanent and in our divisive political climate, are just as likely to expire as to be renewed come 2025.