U.S. tax overhaul could mean big savings for small businesses, real estate buyers

Certain small business owners and real estate buyers will stand to benefit financially from the recently signed U.S. tax plan — potentially spurring a wave of job creation and economic activity, said Mike Owen, chief credit officer at CDC Small Business Finance, a leading small business lender in the nation.

One of the biggest changes involves businesses organized as pass-through entities. They include sole proprietors, limited-liability companies, limited-liability partnerships, and other business types. They’re special structures that allow business owners to have their business income taxed on their personal income tax.

The main idea of a pass-through is to avoid being double taxed on profits. Many real estate firms are often set up as pass-through entities. They’re expected to benefit greatly from the new legislation.

Under the new provision, pass-through entities will be allowed to deduct up to 20 percent on business income from their taxes. The income cap is $315,000 for joint filers and $157,500 for individuals.

What’s more, this legislation reduces the top tax rate on income earned from pass-through business from 39.6 percent to 29.6 percent.

Benefits of the pass-through tax provision

Overall, the ideal outcome would be impacted businesses re-injecting any tax savings back into the U.S. economy by hiring more people or investing in more commercial real estate, said Owen, who also serves as CDC’s director of business development.

“It means more cash they can reinvest in their business, which is a good thing for the economy and our borrowers,” he added.

Also important to note: The new pass-through provision benefits owners of large real estate holdings through LLCs.

Take advantage of this option by using an SBA 504 real estate loan to help finance your commercial real estate purchases. Investment entity ownership is allowed under the SBA 504 loan program.

“A majority of our borrowers form eligible pass-through companies and are able to take advantage of this estate-planning opportunity,” Owen added. “This new pass-through tax (provision) adds additional incentive to this type of structure.”

Do you have more questions about the new tax plan and what it means for your business or clients? Send any inquiries to mowen@cdcloans.com.

CDC Small Business Finance offers several loan options for business owners who want to grow their operations and are planning for their long-term needs. Tell our loan experts about your business, and they’ll work to match you with a financing plan that best suits you.