What Small Business Owners Need To Know About Tax Changes Before The 2024 Election

Potential tax changes are a hot topic as the 2024 presidential election approaches, particularly for small business owners who are on the front lines of economic shifts. With candidates proposing various reforms that could alter tax rates, deductions, and credits, the implications for small business owners could be profound.

In this blog post we will explore how the upcoming presidential election could reshape the tax environment for small businesses. Understanding these potential changes is crucial for entrepreneurs looking to navigate the evolving financial landscape, make informed decisions, and strategically plan for the future. Here is a list of tax changes small business owners will face and how these changes may potentially affect their business.

Expiration of the Tax Cuts and Jobs Act

Many provisions of the 2017 TCJA, which lowered tax rates for individuals and businesses, are set to expire at the end of 2025. If no action is taken, this could result in higher taxes for individuals and businesses. For instance, the top individual tax rate would rise from 37% to 39.6%, and the standard deduction could be reduces significantly. The Qualified Business Income deduction for pass-through entities may also phase out by 2026, impacting many small businesses.

Corporate Tax Rates

There are stark differences in the candidates approaches to corporate tax rates. Kamala Harris's platform supports raising the corporate tax rate to 28% while Donald Trump aims too reduce it to as low as 15% for certain businesses, with a 20% rate for others. The corporate tax rate changes could influence future business structures and tax planning.

Bonus Depreciation

The bonus depreciation benefit which allows businesses to deduct a large percentage of the cost of certain assets, is phasing out. it's currently set to decrease to 60% in 2024 and 40% in 2025, with complete phase-out by 2027. This could affect capital investments for small businesses.

Tax Credits and Deductions

Harris proposes expanding the start-up deduction from $5,000 to $50,000, which could benefit new small businesses. Trump, on the other hand, seeks to maintain TCJA provisions like the QBI deduction and current corporate tax levels.

Estate and Gift Tax

The current estate and gift tax exemption of $13.61 million may fall back to $7 million (adjusted for inflation) if the TCJA provisions expire in 2026. This change could have significant implications for small business owners

Staying informed about the different proposals from each candidate allows entrepreneurs to anticipate how these shifts might affect their operations, profitability, and long-term planning. Whether facing increased taxes, new incentives, or altered regulations, proactive preparation will be essential for navigating this evolving environment. By engaging with tax professionals and actively participating in the electoral process, business owners can better position themselves regardless of the outcome.