New Tax Law Makes Small Businesses Rethink Ideas

As Congress debated a new tax law at the end of last year, Jerell and Elissa Klaver began revising their company's plans for 2018. The Klavers crunched the numbers, estimating how a lower tax rate and bigger deductions on equipment purchases could help increase their sales of bath soaps and other personal care products. They've already hired an engineer to create new manufacturing machinery for their company, Fort Collins, Colorado-based SALUS.

"For our business, pennies add up. If I can save a penny, it gets big really fast," Jerell Klaver says.

Although there are still many unknowns about the tax law that took effect Jan. 1, some small business owners have already figured out that they stand to gain from some of its changes and are changing their plans to maximize their benefits. Some believe they'll get a break on income taxes for sole proprietorships, partners and what are called S corporations. Those who buy new computers, vehicles or other equipment can take a bigger deduction.

Klaver estimates SALUS will save $500,000 to $1 million in taxes in one year, partly from the breaks on equipment purchases. The law nearly doubles to $1 million the amount small companies can deduct up-front on equipment. It also allows companies of all sizes to fully deduct larger equipment and property purchases during each of the next five years rather than depreciate them over years, the requirement under the previous law.

New manufacturing equipment will help SALUS meet increasing demand for its products. Klaver also expects to save enough money to add to the staff of 60.

Many owners and their tax advisers, though, are still unsure of the law's impact. The wording of the law is complex, containing many limitations on a number of breaks for individuals and businesses, and the IRS has only recently begun writing the...

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