PA State Senate Approves Small Business Tax Reform

Last week, the Pennsylvania state Senate approved legislation to align Pennsylvania tax law concerning expense deductions with federal law. The current system results in unequal treatment of Pennsylvania small businesses.

Senate Bill 349 would increase the state limit for property that may be treated as a deductible expense in calculating personal income tax from $25,000 to $1,050,000. This provision is related to the commonly known Section 179 deduction available for many taxpayers on their federal income tax returns. It allows taxpayers to deduct the cost of certain qualifying property in the year it was placed in service, rather than depreciating it over the asset’s life.

The federal Tax Cuts and Jobs Act of 2017 raised the Section 179 deduction limit from $500,000 to $1 million annually. Pennsylvania law currently limits the deduction to $25,000 for businesses organized as S corporations, partnerships, and sole proprietorships.

The bill now moves to the state House for consideration. Senate Bill 349 is part of a larger small business tax reform package. The state legislature is also considering two other bills related to like-kind exchanges and net operating losses for small businesses.

Have questions about how your small business could be affected by these proposed Pennsylvania small business tax reforms? Schreiber Accounting and Advisory can help. Contact the firm for more information.

Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.