Small business owners have really struggled for a few years, and things are starting to finally turn around. The improved economic climate has allowed existing small business owners to expand, and has allowed new entrepreneurs to fulfill lifelong dreams by bringing their new startups to life. In an effort to continue this economic turnaround, the House approved a tax law aimed at helping small business owners.
The Wall Street Journal reports that the House voted on June 12 to make permanent a tax break that allows small businesses to write off up to $500,000 in new equipment purchases. Dozens of Democrats joined republicans to make this bipartisan effort possible. The stated reason for making what has been a temporary tax break permanent is to provide both business and government budget writers with some level of certainty going forward. The $500,000 break has existed since 2010, but it would drop to $25,000 this year if Congress fails to act.
USA Today explained in an article exactly what this tax break does for small business owners. It helps them in two ways. First, it allows business owners to write off the costs of computers, machinery, and other equipment sooner than they would otherwise be allowed to under the tax code. It also allows business owners to write off the costs of improving retail property in a similar expedited fashion. The tax break expired at the beginning of this year.
The proposed law still has quite a few hurdles to leap before becoming part of our tax code. It would first have to make it through the Senate. The Senate has been working on a different approach that would extend this tax break, along with others, temporarily through 2015. Due to this disagreement in approach, it is unlikely that an agreement will be reached between the chambers of Congress anytime before the midterm elections in November. The proposed law would also have to survive a possible presidential veto. The White House has threatened exactly that, claiming that making the tax break permanent would add $73 billion to the national deficit over the next ten years. While several dozen House Democrats joined Republicans in backing the bill, the Democratic leadership in the House opposed the measure.
The Wall Street Journal also reports that the House passed another tax bill that will affect some small businesses. The second bill also deals with making an up-to-now temporary change to the tax code into a permanent provision. This second provision eases the tax burden placed on businesses that convert from taxable corporate status to small business status. Usually small businesses don’t pay corporate level taxes–instead the owner of the business pays taxes on the business’s profits on his or her own individual tax return. This bill faces the same obstacles in the Senate and at the White House as the other tax bill.