A proposed bill for the U.S. House of Representatives would provide additional deductions for those who start a corporation and reduce taxes on those who invest in them.
The small business bill would allow entrepreneurs to deduct more of their startup costs. The current law allows taxpayers to deduct up to $5,000 of the costs they accrue in the process of starting a business, but reduces that deduction amount if those expenses are greater than $50,000. The new proposal would increase the deduction amount to $20,000 and increase the $50,000 threshold to $75,000.
Small business investors would also be temporarily able to exclude 100 percent of their investment income from capital gains taxes if the stock is purchased before the end of 2011 and kept for five years. The recovery act had temporarily increased the exclusion percentage from 50 percent to 75 percent.
The Wall Street Journal reports that the bill is built off of a set of small business proposals first suggested by President Barack Obama earlier this year. Lawmakers are also developing a $30-billion small business loan fund – another of the president’s proposals.
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