More people may opt to join the ranks of the self-employed as a result of the Tax Cuts and Jobs Act, signed into law on December 22, 2017. A provision in the law pertaining to pass-through income enables certain business entities and taxpayers to reduce their taxable earnings by 20%. This could add fuel to the burgeoning “gig economy” in the Boston Metro, and encourage more small business start-ups in the region.
Entrepreneurship trends have already been running strong. According to Forbes, IRS records for 2014 show that 46 million tax returns nationwide reported income from a sole proprietorship, or a pass-through business entity such as an S corporation, partnership, or LLC. The data also counts pass-through income from rents, royalties, and farm or ranch operations. All told, about 1 in 3 individual taxpayers reported business-related income.
An analysis of the new tax law by Kiplinger suggests that even 1040 filers who attach a Schedule C will be able to take advantage of the 20% break. For example, a sole proprietor in the 24% income tax bracket could see their tax rate effectively lowered to 19.2%.
Before anyone leaves their job to pursue the dream of business ownership, it’s important to remember that self-employment and small-business startups have inherent risks. Freelancers and entrepreneurs operate without the traditional perks of employment, such as insurance benefits, vacation and holiday pay, unemployment compensation and merit pay increases. Independent contractors may also be paid less than a typical employee performing the same tasks. Much depends on the skill set demanded by the position, and the talents of the independent contractor.
Still, the new tax law could be lucrative enough to encourage more of Boston’s youthful, highly-educated workers to opt for entrepreneurship or independent contractor status. This could make for a very competitive business and employment environment in the near future, since the Unemployment Rate in the Boston Metro is already trending near an enviable low of 3.1%.
Please note, we are not providing tax advice! Please see your professional tax preparer to see how the new tax laws may work for you and your Boston Metro business.
Are you ready to begin, relocate or expand your business in the Boston Metro? Team up with the Jay Nuss Realty Group, LLC! Whether you are thinking of buying or leasing Boston Metro commercial real estate, we can help you find the ideal property.
Contact us today for expert guidance!