Small business tax deductions are an important aspect of managing the financial health of your business. Understanding the latest updates and changes in tax laws can help you maximize your deductions and minimize your tax liability. In this article, we will explore some of the recent updates and changes in small business tax deductions that you should be aware of.
One of the most important updates in small business tax deductions is the Tax Cuts and Jobs Act (TCJA) that was signed into law in 2017. This legislation brought significant changes to the tax code, including changes to the deductions available to small businesses. One of the key changes introduced by the TCJA was the introduction of the Qualified Business Income (QBI) deduction, which allows small business owners to deduct up to 20% of their qualified business income from their taxable income.
Another important change introduced by the TCJA was the increase in the Section 179 deduction limits. The Section 179 deduction allows small businesses to deduct the full cost of qualifying business equipment and property in the year it is purchased, rather than depreciating it over several years. The TCJA increased the maximum deduction limit to $1 million, making it easier for small businesses to invest in new equipment and take advantage of the tax benefits.
In addition to the changes introduced by the TCJA, there are also several other updates to small business tax deductions that you should be aware of. For example, the IRS has updated the mileage rate for business use of vehicles to 58 cents per mile for 2019, up from 54.5 cents per mile in 2018. This can result in significant savings for small business owners who use their vehicles for business purposes.
Another important update is the expansion of the meal and entertainment deduction limits. Under the TCJA, the deduction for business-related meals and entertainment expenses was reduced to 50% of the actual cost. However, recent updates have clarified that certain business meals are still fully deductible, including meals provided for the convenience of the employer on the business premises.
As a small business owner, it is important to stay informed about the latest updates and changes in tax laws that could impact your business. By understanding the latest deductions available to you, you can make informed decisions about your expenses and investments, and ensure that you are taking full advantage of all available tax benefits.
In conclusion, staying informed about the latest updates and changes in small business tax deductions is essential for effectively managing your business finances. By keeping up to date with changes in tax laws, you can maximize your deductions and minimize your tax liability, ultimately helping your business thrive and grow.