Advisor Flipbooks

6 Business and corporate taxes. The OBBBA's small business and corporate tax changes are being viewed as a step toward long-run economic growth, but some permanent deductions will negatively impact revenue generation. 3 The law solidified the following key tax provisions: 3 Ibid. 1. Locking lower corporate tax rates. Previously enacted in the TCJA. 2. Section 1202 qualified small business stock (QSBS) election. This benefit is expanded with shorter holding periods, gain exclusions ranging from 50%-100% over five years, and a maximum lifetime gain exclusion increase to $15 million. 3. Section 199A qualified business income (QBI) deduction. Up to 20% of QBI for qualifying pass-through businesses is made permanent with broader eligibility thresholds. 4. 100% bonus depreciation. Also made permanent for property placed in service after January 19, 2025. 5. Section 179 expense limitation. Is increased to $2.5 million for property placed in service after December 31, 2024. 6. Domestic research and development (R&D). Qualified expenses are immediately deductible with retroactive relief for small businesses going back to 2021. 7. Qualified Opportunity Zones (QOZ). These are made permanent. These benefits, which include a 10-year rolling deferral and/or reductions, are extended starting in 2026. WH AT IT M E A N S The new laws memorialize and/or expand many TCJA provisions. This provides opportunity for small businesses, startup C corporations, and their stockholders to qualify for meaningful tax breaks. This is particularly true for domestic companies that are incentivized more than international businesses. Since many of these deductions were already in existence, planning will be much of the same. However, many of these expanded credits and deductions can bring even more of a meaningful impact for small business owners compared to the past. Wealthier taxpayers will look to leverage tax reduction and deferral opportunities through QOZ investments, particularly in times of larger liquidity events. Regardless of wealth level, the laws should stimulate investment in real estate and research and development. Ultimately, small business owners should be planning closely with their internal and external financial teams to determine limitations as well as how to optimize tax benefits. They should be aware of how proper entity selection can qualify them for breaks. They should evaluate available business credits, such as for childcare facilities, R&D tax credit, rehabilitation of buildings, or paid family and medical leave. They should understand which expenses can (healthcare insurance or meals for business purposes) and can't (entertainment and membership dues for entertainment) be run through the business.

• Cover