Potential Tax Changes That Could Impact Small Businesses in 2021
Small businesses are sensitive to tax laws in ways big businesses are not. Most small businesses are pass-through entities that pay taxes at individual rates.
What taxes are likely to change with the new Congress? How will these taxes affect the various levels of wealth?
• Capital Gains Tax- Proposed Change: 23.8% to 43.4%. Currently, long-term capital gains on assets held over one year are taxed at a maximum Federal rate of 20% plus a 3.8% Medicare surtax. President Joe Biden’s reported proposals would raise the top rate almost double to 43.4% in order to help pay for education and childcare proposals.
• Corporate Tax- Proposed Change: 21% to 28%. The proposed infrastructure improvement plan, which includes raising the corporate tax rate to 28% from 21%. This could result in business owners having less income to invest into future business operations, less income to pay employees and even the termination of jobs.
• Estate Tax- Proposed Change: 40% to 45%. With the current $11.7 million threshold, very few Americans ever have to deal with the estate tax. The awareness and need to review any existing plan and or establish a plan is changing quickly with the Biden proposal to revert back to the 2009 level of $3.5 million
Compensation Methods Startups Should Consider
Compensation is a vital part of human resource management, which helps in encouraging the employees and improving organizational effectiveness.
The compensation package offered to a company’s employees is essential not only because it costs money, but because it is likely to be the primary reason the employees work for the company.
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