August 19, 2022

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Inside the Inflation Reduction Act

On Tuesday, President Joe Biden signed into law the Inflation Reduction Act, a sweeping measure that aims to tackle inflation, health care, the national deficit, and more. With such a wide-ranging bill, you might be thinking, “What’s in it for me?” If you’re a small-business owner, the answer is: 

  • A lucrative tax credit. The Inflation Reduction Act doubles the research and development tax credit, raising the limit from $250,000 to $500,000. The refundable credit is designed to offset the cost of developing new or improved business elements. Business owners can apply the credit against payroll taxes and many business expenses, like product development and technology. What’s more: In the past, the R&D tax credit could only be used to offset the Social Security portion of the payroll tax; now it can be used to offset both Social Security and Medicare portions of the payroll tax.
  • Probably not a tax hike. To pay for some of the spending, the bill includes a minimum 15% tax on corporations. While that could make some business owners flinch, just know it’s aimed at companies that earn more than $1 billion a year.
  • Potential audits from the IRS. The bill also calls for stronger tax compliance by increasing IRS funding—a move that will generally lead to more frequent audits for the wealthy. On the plus side, it could also result in improved customer service from the federal tax agency.

In the coming months, we’ll keep you posted on all the ways the Inflation Reduction Act can impact your business.

SSBCI updates

When more Americans started small businesses than ever before, the federal government took notice. So as part of the 2021 American Rescue Plan, policymakers boosted small business support by reviving the State Small Business Credit Initiative. This round of the SSBCI allocates $10 billion in federal funds to state governments, which invest those dollars into local small business support programs. Here are the states benefiting thus far:

  • Five states—Hawaii, Kansas, Maryland, Michigan, and West Virginia—were approved in the first round in May 2022. 
  • In July, another nine states were approved: Arizona, Connecticut, Indiana, Maine, New Hampshire, Pennsylvania, South Carolina, South Dakota, and Vermont.
  • North Carolina most recently received funding through the program.

Small businesses may be able to apply for loans and other benefits when their state receives funding through the SSBCI. We provide a state-by-state breakdown of the plans approved for each state, including where to find more information and application details. The Treasury will continue approving plans on a rolling basis, so check back for updates. 

What’s trending?

With news of shrinking GDP and rising inflation, the U.S. is on watch for a potential recession. But, according to Gusto’s Economic Trends Tracker, the labor market was strong in the first half of the year. Here’s what our tracker found in its July update: 

  • Hiring is seasonally slow. The net hiring rate stood at 0.7% in July 2022, down from the 1.9% growth rate seen both in June 2022 and summer 2021. 
  • Terminations have dropped. The rate of involuntary terminations edged down from 1.3% in June to 1.2% in July, which shows employers are intent on retaining staff amid an ongoing labor shortage.
  • Wages have improved. The average hourly earnings increased 5.6% from July 2021 to July 2022, from $30.97/hr to $32.70/hr. Though robust, this wage growth isn’t keeping up with prices that have risen 9.1% over the past year.

Read more from Gusto’s Economic Trends Tracker here.

Fresh From Gusto

Watchlist

AUG 24: Leveraging Federal Programs to Improve Access to Capital for Small Businesses

On Aug. 24, join the U.S. Dept of the Treasury in collaboration with U.S. Black Chambers of Commerce to learn how the Small Business Investment Companies (SBIC) program can complement CDFI and New Markets to accelerate wealth creation in underserved communities. Register here.

AUG 25: Your Business May Qualify to Save Thousands with the R&D Tax Credit

Businesses can win big from a recent change in the Research & Development Tax Credit. You can now claim up to $500,000 using this refundable credit, which can help you reduce payroll taxes and help offset some of your expenses. If you develop new products, reduce uncertainty through innovation, or use hard sciences in the course of business, it’s worth taking a look. This webinar explores what the R&D Tax Credit is, who qualifies for it, and how to claim it. Register here.

SEP 6: Let’s talk SEO 

SEO—search engine optimization—isn’t just a buzzword. It’s a strategy that can help you drive customers to your website and gain business—and it’s a lot easier than you might think. In this presentation, learn three key tips on how to implement SEO practices so you can strengthen your business’ brand and content and help increase traffic to your website. Register here.

Find the latest relief options in our Small Business Relief Finder.

Want more news and resources? Check out past editions in our archive.

Mohini Kundu Mohini Kundu is a freelance writer and editor. She studied journalism at Northwestern University and started her career at The Huffington Post before moving into tech where she worked as a content marketer for 7 years. She writes about several topics including psychology, business, finance, and environmental issues.

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