By now, businesses have begun to feel the effect of the Tax Cuts and Jobs Act. With the corporate tax rate at 21%, and eligible pass-through entities able to deduct 20% in business income from their personal taxes, businesses big and small are finding themselves with more cash on hand than previously. But what to do with that windfall? Here’s how you can make the new tax law work even harder for your business.
Build Cash Reserves
If you own a business, you know there’s rarely enough cash on hand to grow your business the way you want to. Consider taking at least some of the expanded income you realize this year and build up your cash reserves. That way you’ll have money in the future to take advantage of opportunities that arise. Call it saving for a rainy day.
Pay Off Debts
Debts can be a real drag on business finances. Now might be a good time to pay off that mortgage, equipment loan, or credit card debt. Getting out from underneath debt now will position your business more solidly and improve your ability to secure financing in the future.
Invest in Capital Equipment
The new law doubled what businesses can deduct for equipment from $500,000 to $1 million per tax year, and you no longer have to depreciate the expense. So, you may want to purchase computers, office furniture, machines, vehicles, and other business property to take advantage of this change right away. Maybe it’s even time to invest in automating any processes that can be, helping to ensure the long-term financial health of your business.
Keep Current Employees Happy
For many businesses, employees are their biggest investment. Replacing skilled, knowledgeable employees – especially when unemployment is at historic lows – can be a difficult task. Consider amping up wages and salaries, offering bonuses, and adding a benefit or two, to keep your employees on staff and feeling committed to your organization.
Hire More Employees
If hiring more employees will help to kick start your business into increased profitability, now may be the time to do so. Increased production could propel your business forward, creating energy and momentum that helps improve your odds for success, today and for years to come.
An experienced accountant can help you make the right decisions regarding how to best handle your evolving business goals and the increased cash you now have on hand. Consider contacting your accountant for tax and general business advice.