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New Tax Law Can Benefit Solution Providers That Act Quickly

A tax expert said that the clock is ticking for solution providers that want to take advantage of how the new tax law treats capital investments for their businesses.

The new tax law could be a win for solution providers, according to a Boston-based tax expert.

"This is like a bargain basement thing," said Bob Pozen, senior lecturer at MIT Sloan School of Management. "It only last five years – go out and take it now.’

The new law allows companies to deduct the full cost of their capital investments the same year that investment was made.

"All companies that are providing new technology are in a good position to go to their clients and say, 'You have the next four or five years to invest in new technology, new equipment, new software, and expense all those investments in the year they are put in service, rather than deduct them over their useful life and spread that around,'" Pozen said.

The tax law may also benefit small businesses. Small and pass-through businesses that pay taxes as individuals will receive a newly created deduction. Pass-through companies will now be able to deduct 20 percent of certain types of non-salary business income

"There are income limits – income thresholds – it’s roughly $157,000 a year for individuals and $315,000 for couples. If you’re below those income thresholds and you get business income through a partnership, you’re allowed to deduct 20 percent of that before you pay your income tax," Pozen explained. "So, theoretically, if you’re in the top bracket and you would pay 37 percent as your rate, you’re allowed to deduct 20 percent of your income which might bring it down to 30 percent. So, my advice to all of your small businesses, which my guess is they are mostly partnerships, is to talk to your tax advisor and see if they can take advantage of this new 20 percent limit."

The Tax Cuts and Jobs Act appears to be good news for some employees too. A recent survey from the global advisory company, Willis Towers Watson, shows that two-thirds of companies say they plan to or have already adjusted employee benefit programs in light of the new tax law. The firm surveyed 333 midsize and large employers in early January.

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