Many small business owners across the country are keeping their companies running on rather thin margins, and every extra dollar can make a big difference for the future success they enjoy. With this in mind, a number of the nation's federal lawmakers are now considering a new bill that would help to provide more tax breaks to certain independent companies when they want to expand.
U.S. Senators Robert Menendez and Pat Toomey, a New Jersey Democrat and Pennsylvania Republican, respectively, recently introduced a bipartisan bill that would allow small businesses to deduct the first $500,000 in equipment purchases they make from their yearly tax bills, according to a report from Menendez's office. This legislation, dubbed the Start Up Jobs and Innovation Act, could help more new small businesses get their feet under them without a major financial burden. Currently, new small business owners can only deduct a small amount of their initial costs (limited to $5,000), and then have the remainder applied over the next 15 years, which can obviously be additionally burdensome for burgeoning companies. The bill has already won significant approval from the National Federation of Independent Business and a number of other small business advocacy organizations.
"I'm here with Senator Toomey to introduce this bill because I believe that investing in our small businesses is the smart thing to do for our communities and our economy," said Sen. Menendez. "Yet too often, our tax rules aren't written with the understanding of the small business owner in mind. That's why our bill will make it easier for small businesses to do their taxes, free up capital for investment and job creation, and allow small businesses to use the same tax preferences large firms have available for innovation."
The bill will further give the kinds of tax breaks that are available to large tech companies to their smaller competitors as a means of leveling the playing field, the report said. Companies investing in research, specifically, will be able to deduct losses and also become eligible for additional tax credits that can help them to better weather some financial difficulties should they crop up. Finally, the law would make it easier for small businesses to deal with their tax bills in general with a "cash accounting" method that will aid them in getting their obligations figured out, and paid, more quickly.
What could this mean for small businesses?
Because many small businesses fail within a few years of starting simply because the amount of credit they often have to take on to get going is so massive, the ability to write off significantly more of their initial costs could be a major boon for future success. That added cushion that will save them so much money right away, rather than over the next decade and a half, could go a long way toward ensuring not only that they'll be able to deal with any early financial difficulties, but also that there will likely be fewer of them.
That kind of added stability can be a boon for new independent enterprises because overnight success is very rare, and they will likely be operating at a loss in the early goings. Therefore, it may also be wise for owners to do as much as possible to keep all their other costs down, and that could include finding more affordable small business insurance policies. The lower the cost for coverage including workers' compensation or liability insurance, the more financial flexibility small business owners may have as they start their path toward a successful future.