Vice President Kamala Harris has unveiled a proposal to substantially increase tax deductions for startup expenses incurred by new small businesses. This initiative is part of a broader tax-centric economic strategy that the Vice President has gradually revealed over the past few weeks. CBS News reported that Harris aims to significantly expand the small business tax credit, increasing it from $5,000 to $50,000 to help entrepreneurs offset the average $40,000 startup cost. She also has set an ambitious goal of reaching 25 million new small business applications during her first term, surpassing 19 million filed under the Biden-Harris administration.
Key Takeaways
During a speech in New Hampshire, Forbes recently reported that Vice President Harris proposed increasing the tax deduction for small business startup expenses from $5,000 to $50,000. She described it as “essentially a tax cut for starting a small business.”
- The policy would be a tenfold expansion of the current $5,000 startup tax deduction.
- The plan would allow new small businesses to spread the $50,000 deduction across multiple years or claim it in full once they become profitable.
- Harris outlined her administration’s intention to simplify and reduce the cost of business tax filing, comparing the approach to the standard deductions available for individual taxpayers.
Current Small Business Tax Deduction: An Overview
Deduction Limit: Small businesses can currently deduct up to $5,000 for startup expenses. Extended Deduction: Any startup costs beyond the initial $5,000 can be spread over 15 years. Eligible Expenses: The IRS allows deductions for various startup costs, including: Advertising, employee training and instructor wages, consultant and executive salaries and Travel expenses related to securing customers, suppliers, or distributors
Vice President Harris’s proposal could significantly impact the small business landscape
The plan aligns with her ambitious goal of attracting 25 million new small business applications during her first term if elected president. This target builds upon the current administration’s achievements in fostering entrepreneurship.
Recently, President Joe Biden’s administration reported a notable milestone: Since the beginning of his presidency, 19 million new small business applications have been made. Harris’s proposed tax deduction increase aims to accelerate this trend further, offering financial relief to millions of aspiring entrepreneurs and stimulating economic growth through increased small business formation.
The proposals highlight Harris’ firm belief that the nation’s 33 million small businesses are the backbone of the U.S. economy, employing nearly all private-sector workers, generating trillions annually, and fueling economic growth and innovation, a campaign official told CBS News.
Harris’ tax deduction plan would also allow new businesses to defer claiming the credit until they become profitable, helping to lower their tax burden.
Harris Proposed Streamlining Tax Filing For Small Business
The presidential candidate also advocates a simplified tax filing process by introducing a standard deduction for small businesses. Her plan also aims to make it easier for companies to obtain occupational licenses and encourages state and local governments to reduce regulations hindering small business growth.
“We’re going to make it more affordable and easier for small businesses to file taxes,” Harris said, emphasizing her commitment to cutting through red tape to create a more streamlined process that benefits the entire economy.
Conclusion
The Internal Revenue Service has faced challenges in properly allocating small business tax benefits, particularly during the COVID-19 pandemic when it observed increased fraudulent claims. This history raises questions about the implementation of new tax deductions. When asked to provide details on the eligibility criteria for startups and small businesses under the proposed tax deduction, the Harris campaign did not respond. According to CNBC, The Harris campaign has yet to respond to a request for clarification about which startups and small businesses would be eligible for the tax deduction. This lack of clarification leaves uncertainty about which specific entities would qualify for the enhanced tax benefit, potentially complicating efforts to ensure the deduction reaches its intended recipients.
