Congressman Vern Buchanan (R-FL) has reintroduced the American Innovation Act (H.R. 1778), which seeks to modernize and expand the tax treatment of start-up costs for new businesses.
Under current law, entrepreneurs can deduct just $5,000 in start-up expenses in their first year of operation, with the benefit phasing out once expenses exceed $50,000. The Buchanan bill would increase that deduction to $20,000 and raise the phase-out threshold to $120,000. It also clarifies eligibility for partnerships and S corporations, ensuring the vast majority of new businesses structured as pass-throughs can fully benefit.
As S Corporation Association President Brian Reardon noted:
Nearly all job creation in the US comes from start-ups. Without them, millions of Americans would struggle to find work. The American Innovation Act encourages entrepreneurship and job creation by reducing the costs of starting a business. It’s an essential part of our economy, and the S Corporation Association supports it.
Congressman Buchanan framed the effort in similar terms:
Entrepreneurship is at the heart of the American Dream. During National Entrepreneurship Week, we should be focused on removing barriers for the job creators who drive the American economy. My American Innovation Act cuts taxes on start-up costs so small businesses can reinvest in their companies, hire workers and strengthen their local communities.
More than half of new small businesses fail within five years, while roughly the same number begin with less than $25,000 in capital. In an environment where access to capital (particularly at early stages) is absolutely critical, modernizing a decades-old start-up deduction is overdue.
S-CORP is proud to support the American Innovation Act and will continue working with Congress to ensure that tax policy reflects the realities facing America’s entrepreneurs and the pass-through businesses that power our economy.