payroll taxes

2024 Section 179 Deduction Limits for Small Businesses Taxes

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small business section 179

Small business tax deductions are important in order to offset high business taxes levied against small business owners and entrepreneurs. This is especially true for work from home entrepreneurs who file as sole proprietors, or as a Limited Liability Company aka LLC, with sole proprietor tax status. Small business owners can get hit with high tax bills thanks to Self-Employment Taxes. Self-employment tax, or SE Tax, is so high because it includes taxes that would usually be paid by the employer. In a typical employer-employee scenario, the employee pays 6.2% in Social Security Taxes. The employer withholds this amount from the employee’s paycheck. What many people don’t realize is that the employer also pays 6.2% in social security tax for the employee. A small business owner that files as a sole proprietor is on the hook for the whole amount! The self-employment tax rate – sometimes called the SE tax rate – is 15.3%, which is 12.4% for social security taxes plus another 2.9% for Medicare taxes. That 15.3% is on top of regular Federal Income Taxes. A successful small business owner in the 30% tax bracket, pays a blood curdling 45% tax rate. And that is before adding Medicare …

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Payroll Tax Cut Extended

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Yea! Just got news that Congress decided not to kill off the fragile economic recovery in the U.S., well, not yet at least. Congress has passed legislation that extends the payroll tax cut through the entire year. The tax cut was a 2 percent reduction in the amount of Social Security tax paid by workers. The employer part of the social security tax (and therefore a significant part of the self-employment tax) was not cut. However, this tax cut put additional money in the pockets of households across America. Letting it expire and seeing what happens when people suddenly realize their paycheck is smaller than they are used to would have been a big problem. Virtually every respected economist in the world warned that failure to extend this particular tax cut would have a big impact on the U.S. economy, perhaps causing the tepid growth to teeter, or plunge all the way back into recession. I’ll be back later with more details once I have a chance to comb through the actually bill on its way to President Obama’s desk.