The Tax Cuts and Jobs Act of 2017, also known as H.R.1 and Public Law No: 115-97, was a comprehensive reform of the US tax code that aimed to boost economic growth by providing tax relief to businesses and individuals. The Act brought significant changes to the way businesses are taxed, which has had a positive impact on the economy.
One of the most notable changes brought by the Act is the reduction of the corporate tax rate from 35% to 21%. According to the Joint Committee on Taxation, this change alone is projected to increase GDP by 1.5% to 2% over the long term. In addition, it is estimated to increase investment and wages by 2.2% and 1.5%, respectively. The Tax Foundation estimates that this change will lead to an increase of 339,000 full-time jobs.
The Act also introduced a provision known as the Qualified Business Income Deduction (QBID), which allows small businesses to deduct up to 20% of their qualified business income. (Sec 199A) This provision has been particularly beneficial for small businesses, as it allows them to keep more of their money, which can be used to grow their businesses and create jobs.
Another important provision of the Act is the expansion of bonus depreciation. The Act increased the bonus depreciation percentage from 50% to 100% for property acquired and placed in service after September 27, 2017, and before January 1, 2023. (Sec 168) This has encouraged businesses to invest in new equipment, which has led to increased productivity and economic growth.
The Act also changed the individual tax code, such as increasing the standard deduction and capping certain deductions. According to the Tax Foundation, the Act is projected to increase after-tax income for all income groups on average, with the largest percentage increase in after-tax income for taxpayers in the bottom 80% of the income distribution.
Overall, the Tax Cuts and Jobs Act of 2017 has had a significant impact on the economy. The corporate tax rate reduction, the Qualified Business Income Deduction, and the expansion of bonus depreciation have all had a positive impact on businesses, job creation, and economic growth. The changes to the individual tax code have also resulted in tax savings for many Americans. It is important to note that the numbers and percentages provided are nationwide, and the actual impact of the act to each business may vary. As compliance and tax advisors, we recommend business owners review the act and its provisions to see how they can take advantage of it. At BCA, we work with our clients to understand how they can take advantage of all the Tax Cut and Jobs Act of 2017 can offer. Contact us today!
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