Small-business owners can expect a bonanza in tax savings, thanks to the GOP's proposed tax bill. But that doesn't necessarily mean it's smart for freelancers, independent contractors and other solopreneurs to incorporate.
The Senate voted 51-49 on its version of the "Tax Cuts and Jobs Act" early Saturday morning. The 479-page bill includes an array of sweeping changes to the tax code, including the reduction of the corporate tax rate from 35 percent to 20 percent as of 2019.
Big businesses aren't the only ones who'll benefit from the tax overhaul. Small businesses — namely, pass-through entities such as S corporations and limited liability companies (LLCs) — get a break, too.
That's because under current law, profits from a small business "pass through" to the owner and is taxed at his or her individual rate, which can be as high as 39.6 percent. The Senate's bill will allow business owners to deduct 23 percent of their income, which will help them save on taxes.