December 20, 2017
C-Suite Wednesday — The New Tax Bill is Good for Main Street!
By Bob Coleman
Editor, C-Suite Wednesday
You all know about the bill; here are seven bullet points I’ve culled to help you understand how this affects Main Street, and your small business loan portfolio:
1) The small business 20% deduction off of net income is incredible for Main Street. A small business owner who nets $100,000, after paying rent, employees, supplies etc, lops off 20% and now pays taxes on $80,000 — saving $4,800 right out of the gate. (The deduction is available for sole props, LLCs and partnerships.)
2) The standard deduction for single filers is raised to $12,000. Married? $24,000. (That is almost double of where we are today.) In this hypothetical, our married entrepreneur saves over 50% on her taxes. Check out the chart.
|Small Business Income||$100,000||$100,000|
|20% Deduction in New Tax Bill||($20,000)|
|Married Standard Deduction||($12,700)||($24,000)|
|Adjusted Gross Income||$87,300||$56,000|
|Federal Tax Due||$14,878||$6,339|
Note: Federal Self Employment Tax of 15.3% is excluded from analysis.
3) 100% bonus depreciation levels remain. Main Street will be able to deduct 100% of equipment in the first year through 2022. There are also increases in deprecation for “luxury” automobiles.
4) Meals and entertainment. Forget about expensing those tickets for the old alma mater’s Saturday football games. Meals for entertainment are capped at a 50% deduction. Meals provided to employees are now capped at 50% also.
5) Can’t pay for your employees gas as a perk anymore. (Well you can, but it’s taxable income to them.)
6) For employees out on medical or family leave you can claim a tax credit of 12.5%
7) Of course, all is not good news. Due to caps on home interest, it looks like small business owner’s home values, and yours, will decrease in value by 5% in the next two years, reducing homeowner’s equity. Higher priced markets of California and New York will see decreased home values closer to 10%.