A previous accounting provider of ours put out a list out on Friday and it was a bit surprising. Sometimes, I think we get busy and lose sight of some of the changes happening in the government, taxes, and the impact it has on us as business owners. Some things on the list were good, some were bad. Here are the ones which felt relevant to me and important to share:

Business Positive:

•     Lower Corporate Income Tax Rate to 15% (or 20%): Directly increases the profitability of C-Corps. For S-Corps, the benefit is indirect but can still be positive due to increased economic activity and potential benefits if the owner has C-Corp income.
•     Repeal of the 15% Corporate Alternative Minimum Tax (AMT): Simplifies tax calculations and lowers the tax burden for C-Corps that were previously subject to it. S-Corps are generally not impacted.
•     Return to Immediate Expensing of R&D Costs: Improves cash flow for businesses investing in qualifying R&D. While less likely for general training, if the firm develops proprietary tech, this could be beneficial.

Business Negative:

•     Border Adjustment Tax: Creates volatility in currency exchange rates, making international placements (if applicable) more complex and potentially increasing costs.
•     10% Tariff on All Imports: Increases costs for any imported goods or services used by the business, potentially squeezing profit margins.
•     Eliminate Business SALT Deduction: Increases the tax burden for pass-through entities like S-Corps or partnerships, which are common structures for small executive search firms.
•     “Blanket Exemption” on Overtime Earnings: Could increase labor costs if employees demand higher compensation for overtime work to make up for the lost tax revenue.

Personal Positive:

•     Double SALT Limit (to $20,000): Benefits owners in high-tax states who itemize and have significant state and local tax burdens.
•     Increase SALT Thresholds (to $15,000/$30,000): Similar to the above, but with slightly less benefit at the high end.
•     Eliminate Federal Estate Tax: Primarily benefits wealthy individuals and their heirs. The owner of a successful search firm might benefit.

Personal Negative:

•     Eliminate State/Local Income/Sales Tax Deduction, Keep Property Tax Deduction: Impact depends on the individual’s mix of SALT deductions. Could be positive or negative.
•     Repeal Home Mortgage Interest Tax Deduction: Could affect the personal finances of business owners with large mortgages.
•     Lower Home Mortgage Interest Deduction Cap to $500,000: Similar to the above, affects personal finances.
•     Eliminate Student Loan Interest Deduction: Affects individuals with student loans, potentially including employees of the search firm.

None of these bills have passed yet, but all are under consideration. This tax season is going to be challenging for all accountants. The rules keep changing and no one is quite sure what to do.

Advice: Don’t wait to get your taxes ready. Make this year the year you’re WAY ahead of the game. Isolate a day, early this month, and get everything ready for your accountant.