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House committee targets 7 small biz tax changes

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in Small Business Tax,Small Business Tax Deduction Strategies

In a new report, the U.S. House Committee on Small Business has proposed seven rapid-fire changes to the tax code. The report says the code:

1. Has overly complex provisions for home office deductions. Many home-based small businesses miss out on a legitimate deduction.

Proposed solution: Simplify by allowing a reasonable, standardized deduction.

2. Has outdated rules for electronic business equipment. Many small firms forgo investment in new technology and lose their competitive edge.

Proposed solution: Allow taxpayers to deduct a greater portion without keeping detailed records.

3. Fails to accurately index the cost of business vehicles. Entrepreneurs can’t depreciate the true value of their vehicles.

Proposed solution: Allow small business owners with more than 75% business use of a vehicle to recover the true cost (with a price of at least $25,000) over five years.

4. Forces small businesses to use extended depreciation schedules. Entrepreneurs can’t recover costs in a timely manner.

Proposed solution: Allow small businesses to use shorter depreciation schedules in line with technological and market realities.

5. Requires self-employeds to pay taxes on health insurance premiums twice (as employees and business owners). Millions go without adequate (or any) health insurance.

Proposed solution: Allow self-employeds to deduct health insurance like large firms.

6. Limits business meal and entertainment deductions. Business meals and entertainment are important tools of entrepreneurs.

Proposed solution: Raise the small business limit for deducting business meals and entertainment from 50% to 80% or 100%.

7. Curtails investment in small firms. Long-term capital gains rate is practically the same as the rate for qualified small business stock.

Proposed solution: Restore incentives to prompt greater investment in small businesses.

—Adapted from AccountingWEB, Inc., www.accountingweb.com.

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