It seems like we averted fiscal doom (this time) as President Obama, Democrats, and Republicans in Congress finally reached a "fiscal cliff" deal.
But despite President Obama notching a "win," of sorts, on his scoresheet, the deal may seem like some amorphous piece of legislation with uncertain impact on you and your small business.
As with most politicized issues, you may have to roll up your sleeves and really do some reading to figure out just what the "fiscal cliff" deal means for you. To help you out, here are five ways -- some good and some bad -- that the deal may impact your business:
- Higher Tax Rates. Bad news. Tax rates for families with income above $450,000 and individuals above $400,000 will be raised to from 35 percent to 39.6 percent, The Washington Post reports. So if you are a sole proprietor, and you make above these amounts, you could see a higher tax rate, meaning you'll pay more taxes.
- Research and Development. Good news. The research and development (R&D) tax credit was extended for another year and reinstated retroactively for 2012. Employers can now continue to get tax breaks for between roughly 6 percent and 14 percent of their R&D expenditures, writes the Post.
- Section 179. Good news. For another year, business owners can enjoy tax breaks for purchasing or leasing software and equipment. This gives small business owners more incentive to invest back into their businesses.
- The Work Opportunity Tax Credit (WOTC). Good news. Business owners will continue to receive a tax incentive to hire underemployed groups like youths and veterans.
- Payroll Taxes. Bad news. Individuals (i.e., your customers) will likely see a 2 percent increase in their Social Security payroll taxes. This means that your potential customers may have 2 percent less discretionary income to spend at your business, or on your services.
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- Fiscal Cliff Tax Deal: What Does It Mean for Small Business? (Forbes)
- What Online Sales Tax Means for Small Biz (FindLaw's Free Enterprise)
- Taxes About to Go Up for 163 Million Employees (FindLaw's Free Enterprise)