Tax Reform

Small Business Deduction

The centerpiece of the pro-small business tax changes is Section 199A, the Small Business Deduction. Approximately 75 percent of NFIB members are organized as pass-throughs (S corporations, LLCs, sole proprietorships, or partnerships), not as C corporations.

Pass-through business owners  (S corporations, LLCs, sole proprietorships, or partnerships) – regardless of the type of business they own – can claim up to a 20% tax deduction on their share of the business’s income up to $170,050 in tax year 2022 and $340,100 for those filing jointly. For tax year 2023 business income up to $182,100 (individual) or $364,200 (joint). For small business owners whose qualified business income exceeds the threshold, the deduction is subject to formulaic limitations. You can still benefit from the deduction if your business is employee intensive, or you make capital expenditures.

More than 81% of small business owners believe the Small Business Deduction is important to the health of their business. However, without additional congressional action, this important small business provision is scheduled to expire after 2025 alongside other helpful tax benefits. Read more about the Small Business Deduction here.

The Main Street Tax Certainty Act makes this critical deduction permanent. Please ask your Representative or Senators to co-sponsor this crucial legislation and be an advocate for small business tax relief. 

Corporate Tax Rate

Currently, the C corporation rate is 21%. In NFIB’s survey of small business owners, 77% view this as important. Read more from the tax relief survey here.

Estate Tax

For tax year 2022, the estate tax exemption is $12.06 million for single filers and $24.12 million for joint filers. For tax year 2023, the exemption is $13,850 million (individual) and $25.84 million (joint). This protects more small business owners from tax preparation expenses and issues created when business assets are passed on to children or other family members. Nearly 70% of small business owners see this increased exemption as important.

Talk to your financial advisor about  how likely your business is to be affected by the estate tax and other taxes at death currently being considered by Congress – such as the repeal of the stepped-up basis and capital gains rate increase so you can be prepared.

NFIB leads a coalition of stakeholders fighting to Repeal the Death Tax, learn more here.

Lowered Individual Tax Rate

Eighty-four percent of small business owners say the current, lower individual tax rates are important to them. Read more from NFIB’s full 2021 tax relief survey here. 

Standard Tax Deduction

In 2018, the standard deduction nearly doubled to simplify filing taxes for Americans. For tax year 2022, the standard deduction is $12,950, or $25,900 if you’re filing jointly. For tax year 2023 it’s $13,850 (individual) and $27,700 (joint).

Expensing Equipment

Small business owners were already able to immediately deduct some of the costs of equipment purchased for use in their business. The maximum deduction in tax year 2022 is $1.08 million and the 2022 spending cap for purchases is $2,70 million. For tax year 2023 the maximum deduction is $1.16 million and the spending cap for purchases is $2.89 million. Unlike other tax relief,  Section 179 is permanent.

Eligible assets that depreciate over time are now eligible for “bonus expensing” where instead of expensing a fraction of the price per year of use, you can expense the entire purchase at once. Bonus expensing phases out in 2024.

Arizona small business owners Brad and Hilary Scott spoke out on receipts taxes and other issues in 2019.

Family and Medical Leave Tax Credit

The TCJA provides eligible employers who offer paid family and medical leave to their employees a tax credit for tax years 2018 and 2019. The Consolidated Appropriations Act of 2022 (CAA) extends this helpful credit through 2025. Additional information from the IRS is available here.