Small businesses benefit from Trump tax cut simplification 

Tax season is stressful for most Americans. But for small business owners, it can be downright brutal.  

Businesses juggle payroll, profits, and myriad other issues on a day-to-day basis. But during tax season, small business owners also need to worry about whether they have all their receipts, what they can write off, and, most importantly, how to pay a tax bill that might be larger than they expected. 

The Tax Cuts and Jobs Act provided needed relief for small business owners. But that help might be going away. 

Key provisions of the Trump tax cuts are set to expire at the end of the year. If Congress fails to act, the tax cuts will go away, and those tax season headaches will come back. 

Here’s how the TCJA helped make tax season less stressful for small business owners: 

The TCJA lowered taxes for small businesses. 

Businesses can be structured as either C-corporations or “pass-through” companies.  

What’s the difference? 

C-corporations file their own taxes, while pass-through companies’ owners claim profits or losses in their individual tax returns.  

The TCJA lowered tax rates for C-corporations from a top rate of 35% to a flat rate of 21%.  

The law also included a new 20% deduction on qualified business income for companies organized as pass-through entities. 

An increased standard deduction eliminated headaches for small businesses. 

The TCJA saved small businesses a lot of time and money during tax season by doubling the standard deduction and adjusting it for inflation. Millions of individuals and small businesses are taking advantage of it.  

Before the TCJA’s passage, nearly 30% of all taxpayers itemized deductions; since 2018, just 10% of taxpayers filed itemized returns. 

By opting for the higher standard deduction, business owners are no longer required to keep, store, and find reams of paperwork.  

Less paperwork decreases the risk of mistakes and costly audits. And the higher standard deduction allows business owners to shift their focus from itemized personal deductions to maximizing business expenses. 

100% bonus depreciation simplified tax preparation and encouraged growth. 

Before the Trump tax cuts, businesses could write off the cost of new equipment, but they had to do it over a period of years using IRS formulas and schedules. This meant tracking each item, calculating annual depreciation, and adjusting year after year. 

The TCJA allowed business owners to deduct the full cost of new equipment and assets in the year it was purchased. 

The 100% bonus depreciation meant massive upfront tax savings and simplified tax filing. That tax savings also incentivized small businesses to grow or upgrade their equipment. 

Simplified accounting rules mean less stress. 

The Trump tax cuts also allowed more small businesses to use simplified accounting rules. 

Before 2017, if a small business held any inventory or had more than $5 million in gross receipts, it was forced to use complex accounting rules that required stacks of paperwork and detailed tracking of sales, expenses, and inventory.  

The TCJA freed all small businesses with less than $25 million in gross receipts to use cash accounting — a much simpler method that frees business owners to spend more time running their businesses than worrying about tax compliance issues. 

The TCJA helped lower small business tax stress, but the headaches could be returning. 

Tax season is stressful for most Americans and even more so for small business owners. 

The Trump tax cuts gave small business owners some relief from the stress. But if Congress fails to act on many key provisions, that relief will have been short lived. 

You can help make sure that tax season is less stressful for everyone. 

Let your representatives know that you demand lower taxes and simpler tax returns!