The Impact of New Tax Laws on Small Business Owners

The Impact of New Tax Laws on Small Business Owners

Small business owners are often overwhelmed by the complex and ever-changing tax laws. Recently, several new tax laws have been introduced that could have a significant impact on small businesses. As a small business owner, it’s important to stay informed about these changes to ensure you are taking advantage of all available tax-saving opportunities.

Understanding the Tax Cuts and Jobs Act (TCJA) of 2017

One of the biggest changes affecting small business owners is the Tax Cuts and Jobs Act (TCJA) of 2017. The TCJA introduced several new provisions that could reduce the tax burden for small businesses. One of the most significant changes was the introduction of the Qualified Business Income (QBI) deduction. This deduction allows eligible small business owners to deduct up to 20% of their qualified business income from their taxable income. This deduction is subject to certain limitations and eligibility requirements, so it’s important to consult with a tax professional to determine if you qualify.

Maximizing the Section 179 Deduction

Another change affecting small business owners is the increase in the Section 179 deduction. This deduction allows small businesses to deduct the full cost of qualifying equipment and software purchased or financed during the tax year. The maximum deduction limit for 2021 is $1,050,000, which can provide significant tax savings for small businesses.

Implementing Tax-Saving Strategies for Small Businesses

Utilizing Retirement Plans for Tax Benefits

In addition to the above changes, there are several other tax-saving strategies that small business owners can implement. One such strategy is to take advantage of retirement plans, such as a Simplified Employee Pension (SEP) or a 401(k) plan. These plans not only provide tax benefits for the business owner, but also help attract and retain employees.

Proper Classification of Workers

Another strategy is to properly classify workers as employees or independent contractors. Misclassifying workers can result in significant tax liabilities and penalties, so it’s important to understand the criteria used to determine worker classification.

Maintaining Accurate and Organized Records

To take advantage of these tax-saving strategies and avoid any potential tax pitfalls, it’s important to keep accurate and organized records. This means keeping track of all income and expenses, properly classifying workers, and ensuring all necessary tax forms are filed on time.


In conclusion, staying informed about changes to tax laws and implementing tax-saving strategies can help small business owners reduce their tax burden and increase their bottom line. By keeping accurate records and consulting with a tax professional, small business owners can navigate the complex world of taxes with confidence.

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author avatar California Public Accountant and Enrolled Agent
Passionate and experienced Small Business Financial Literacy Educator, I am dedicated to helping entrepreneurs and small business owners build financial literacy and develop the skills needed to manage their finances with confidence. With a deep understanding of financial management, budgeting, and accounting principles, I have a proven track record of delivering high-quality financial education and training to individuals and groups of all backgrounds.


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