BOONTON —When the federal government capped state and local tax deductions at $10,000, small business owners, whose revenue is passed through as personal income, took a huge hit. In response, Assemblyman Anthony M. Bucco helped propose a new plan that would allow small business owners to deduct their income from federal taxes, protecting them from the SALT cap’s blow to their bottom-line.
“The federal $10,000 cap on state and local tax deductions took a toll on property-tax payers,” said Bucco (R-Morris). “And it also took a toll on many small business owners that file under the state income tax. New Jersey is already the most expensive and unforgiving place to own a business. We need to do all we can to help.”
The bill (S3246), which cleared the Assembly Appropriations Committee today, helps S corps and limited liability companies with a tax credit to shift tax obligations from the owners of the business to the business itself.Owners would calculate their share of profit and multiply it by the tax rate they would pay on that profit; 5.25 percent between $1 and $250,000, 6.37 percent between $250,000 and $1 million, 8.97 percent between $1 million and $3 million, and 10.75 percent on income over $3 million. The credit would equal 100 percent of each owner’s taxed share of revenue.
“We should be making every effort to make New Jersey small-business friendly, and this change will provide much needed relief for many of New Jersey’s job creators,” said Bucco.
The tax change is retroactive to January 1, 2018. It passed the Appropriations committee today 9-0.