On May 12, President Trump introduced a comprehensive tax proposal with significant implications for small businesses. Here are some of the key takeaways:

✅ Benefits:

• Permanent 20% QBI Deduction: Pass-through entities like sole proprietorships, partnerships, and S-corps can continue to deduct 20% of qualified business income, reducing taxable income.
• 100% Bonus Depreciation: Businesses can immediately deduct the full cost of qualifying equipment and property purchases, enhancing cash flow.
• Full Expensing for R&D: Restores the ability to fully expense research and development costs, encouraging innovation.
• Increased Standard Deduction and Child Tax Credit: Provides additional tax relief for business owners with families.

⚠️ Challenges:

• “Liberation Day” Tariffs: New tariffs on imported goods are increasing costs for businesses reliant on international suppliers, leading to financial strain and potential layoffs.
• No Tax Increases on High Earners: The absence of higher tax rates for multimillionaires means less revenue to offset tax cuts, potentially leading to larger deficits.
• Delayed Relief Amid Rising Costs: While tax benefits are forthcoming, businesses are currently facing increased operational costs due to tariffs and supply chain disruptions.

📊 Bottom Line: The bill offers long-term tax benefits but introduces immediate challenges. Small business owners should assess how these changes impact their operations and consider adjustments as needed.

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