The Congressional Research Service (CRS) of the US Library of Congress has issued a report with an overview of the main federal tax benefits for small firms.
The CRS report is entitled "Small Business Tax Benefits: Current Law" (RL32254-Version 22, 10 November 2021).
The CRS report summarizes tax preferences available only to small firms in a wide range of industries. As such, the CRS report does not include tax benefits targeted at small firms in specific industries. Nor does the CRS report address tax benefits that are available to firms of all sizes.
The small business tax benefits examined in the CRS report include:
- expensing allowance for machinery and equipment under section 179 of the US Internal Revenue Code (IRC);
- cash-basis accounting under IRC section 446;
- tax credit for the start-up costs incurred by small firms in establishing qualified employee retirement plans under IRC section 45E;
- tax credit for employers who offer or start a 401(k) plan or a Savings Incentive Match Plan for Employees (SIMPLE) that add automatic enrolment under IRC section 45T;
- tax credit for the costs incurred by small firms in complying with the Americans with Disabilities Act under IRC section 44;
- full exclusion from the capital gains tax on the sale or exchange of qualified small business stock under IRC section 1202;
- exemption from the limitation on the deduction for business interest expenses under IRC section 163;
- tax credit for small firms that offer qualified health insurance coverage to employees under IRC section 45R;
- simplified dollar-value last-in-first-out accounting under IRC section 474;
- deduction and amortization of business start-up expenses under IRC section 195;
- ordinary income treatment of losses on the sale of eligible small business stock under IRC section 1244;
- ordinary loss treatment for losses on the sale of Small Business Investment Company stock under IRC section 1242;
- exemption from the uniform capitalization rule under IRC section 263A; and
- use of excess research tax credit to reduce the payroll tax liability of qualified small firms under IRC section 41.
Note: The CRS is an agency within the US Library of Congress and serves the US Congress throughout the legislative process by providing legislative research and analysis for an informed national legislature.