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5 Ways the Control Inflation Act Cuts Taxes for Business Owners

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Will the Inflation Reduction Act (IRA) reduce inflation? We don’t know yet. But one thing it does is reduce taxes for many small business owners, or at least business owners who take advantage of some of its provisions.

Much has been written about the new legislation’s increased taxes, especially on large corporations. A new alternative minimum tax rate of 15% applies to businesses with more than $1 billion. In addition, a new excise tax will be imposed on share buybacks. On top of that, the IRS said he will receive $80 billion in additional funding to step up enforcement. This is a move that affects both large and small businesses.

These factors have made me somewhat critical of the new legislation, as tax increases will affect the money spent by small businesses and their employees.

But there is some good news. The package has five new perks that will save small business taxes in the years to come.

For starters, there is an extension of eligible business income deductions from 2025 to 2027. General depreciation, also known as pass-through deductions (enacted as part of the Tax Cuts and Jobs Act of 2017), allows many “pass-throughs”. Through” corporations (S corporations, partnerships, and other entities where business income is “passed through” to the business owner’s personal return) deduct his 20% of business income. This perk has been a challenge during IRA negotiations, especially for someone making more than his $400,000. Not only did she survive, but the business owner has two more years to enjoy.

Second, the IRA gives small business owners the opportunity to receive generous tax credits on the purchase of used or new electric vehicles. Vans, SUVs, and pickups have a $7,500 “clean vehicle credit,” while other vehicles cost him $80,000 and $55,000.

There is also a maximum deduction of $4,000 for the used car tax credit. Both credits have income limits. It’s not clear (it doesn’t appear to be the case) whether companies will be able to take advantage of this deduction. But given the overlap in personal and business spending of the typical small business owner, especially gig his workers and freelancers, it’s bound to get used somewhere. I recently drove a Nissan Leaf and can vouch for how awesome these cars are. We are confident that you can save

Third, there are various tax credits and rebates available to individuals who invest in improving energy efficiency. This includes solar panels, batteries, energy efficient appliances, water heaters, heat pumps and cooling systems. Since these are “residential” benefits, it is unlikely that businesses will receive these same deductions when investing in similar equipment on their property. Anyway, it’s a tax saving on the owner’s individual return.Also, as a tribute to the corporate world, the IRA is also primarily responsible for his 2033 corporate green energy, construction, efficiency, and other initiatives. Amend, extend, and create tax credits.

Demand for companies that provide green energy and eco-friendly equipment and services demanded by homeowners will certainly increase. More tax credits are available for small businesses that buy and sell manufactured parts used in renewable projects (such as wind turbines and solar panels).

Finally, there was the increasingly popular research and development tax credit extension. R&D credits have been around for years, offering companies of all sizes the opportunity to reduce the taxes they owe based on a formula calculated using the cost of developing a new product. increase. Prior to the IRA, businesses could apply the credit for income tax or payroll tax, but if they chose to do so for payroll tax, they were limited to $250,000, which capped him at $500,000. raised to the dollar.

The Inflation Control Act has the potential to reduce inflation in the long run. or maybe not. It may increase our deficit. or maybe not. Maybe it’s the typical tax and spending bill tactfully passed before a major election. no one really knows.

But i know this. Taxes are the biggest cost to a profit-generating business owner. And this bill will certainly help business owners reduce them.

Gene Marks is the founder of The Marks Group, a small business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.