The Tax Cuts and Jobs Act was signed into law by President Donald Trump on Dec. 22, 2017, and it's being put into action starting with the 2018 tax year.
On the personal side, the final bill cuts income tax rates in almost every tax bracket, doubles the standard deduction, eliminates personal exemptions, doubles the child tax credit, expands medical expense deductions, repeals the Obamacare tax and doubles the estate tax exemption.
On the business side of things, the tax bill lowers the corporate tax rate from 35 to 21 percent -- which is the lowest rate since 1939. For pass-through businesses -- which many small businesses are -- the standard deduction gets boosted to 20 percent. There’s a long list of other deductions and tax changes, but it’s the corporate tax rate cut that’s the kicker here.
Ways to spend your savings.
In response to the lower corporate tax rate that the new tax bill will bring, a number of large American corporations and businesses have already made it clear how they plan to put their savings to work.
AT&T says it will give a $1,000 bonus to 200,000 employees. Wells Fargo is actually going to boost its minimum wage to $15 an hour and donate $400 million to nonprofit organizations in the community. Fifth Third Bancorp will be giving a $1,000 bonus to 13,500 employees, as well as raising the minimum wage for roughly 3,000 employees to $15 an hour. Boeing will reportedly provide an additional $300 million in charitable giving, job training and facility upgrades.
While you might not have the same resources as massive organizations like AT&T, Wells Fargo, Fifth Third Bancorp and Boeing, you will benefit from a 14 percent tax cut, which will certainly lead to some major savings within your own company. The question is, how will you spend it?
While lawmakers on the opposite side of the bill like to claim businesses will only use these savings to pad their stocks and attract more investors, businesses are already showing their willingness to pass on the savings. Here are a few specific ways you can do the same:
Give out bonuses.
You can follow the lead of a handful of major corporations and give bonuses to some of your most loyal and deserving employees. A one-time bonus is obviously a short-term, isolated benefit, but it could enhance employee satisfaction and benefit the personal lives of the people who put it all on the line for you every single day.Raise wages.
If you stand to save a substantial amount from the tax bill, you might want to invest in a more permanent benefit for your employees. Incresing wages -- particularly of those on the lower end of the pay scale -- could produce major rewards in terms of employee engagement and satisfaction.Hire new employees.
Does your organization feel a little strained? Do you need some help? Hiring a couple of new employees could help you regain control and get back on track.Buy much-needed equipment.
One of the less-cited benefits of the new tax bill is the ability for businesses to write off the entire cost of a depreciable asset in the year it’s purchased, as opposed to amortizing over a number of years. If you need to purchase equipment, this could give the opportunity to do so without breaking the bank.Increase giving and philanthropy.
Finally, another good option is to increase your philanthropic giving and/or start a charitable organization. If your company stands to benefit, why not pass the savings on to others in the community?
Push your business to the next level.
The tax bill isn’t some godsend that’s going to drastically change the way you do business and make everything easy from here on out. People on the left like to claim it’s nothing more than corporate greed. People on the right are overblowing the bill and saying it’s the greatest thing to happen in this country in three decades. Both groups of people are out of line. It’s a tax bill -- nothing more and nothing less.
At the end of the day, you still have to show up at work every morning and focus on how you can make your business better. While the tax savings will help your bottom line, it’s up to you to push your business to the next level. No bill drafted in Washington will do that for you