Jere Irwin perks up when asked about the recently approved federal tax reform for businesses.
“It will be a wonderful thing,” said Irwin, president of Irwin Research and Development, a Yakima company that makes machines that manufacture various plastic products.
Irwin said he’s most excited about the drop in the corporate tax rate. He believes the savings will enable him to give employees bigger bonuses this year.
“I rather give it to the people than have the government waste it,” he said.
Yakima Valley business owners are still trying to understand what impact the tax reform — the first in more than three decades — will have on them. But in general, most are enthusiastic about anticipated tax relief.
“As a general rule for small businesses, (reduced taxes) does help to put cash back in the business,” said Steve Noble, co-owner of Abbott’s Printing in Yakima.
Along with the corporate tax rate drop, there are a number of changes that will affect businesses. They include a deduction on taxable business income for business owners who report business profit (or loss) as part of their personal income and the ability to immediately write-off the full value of certain assets.
Noble said he hopes any savings will offset increased costs elsewhere, such as worker wages.
“We’re in a market where we can’t raise prices, so we have to absorb (costs),” he said.
The tax savings may also provide funds for new equipment, such as printers and computers, “all those things you’re constantly having to buy as a small business,” Noble said.
One change Yakima Valley business owners are excited about would allow them to immediately depreciate — write off — assets, such as equipment, within the tax year they were acquired or purchased.
Larry Burmaster, owner of Buhrmaster Baking Co. in Yakima, said he’s been looking into new automatic machinery, such as a bread cutting and packaging machine, that could help him reduce labor costs. Such machines are expensive — they can cost thousands of dollars or more. But the possibility of a quicker write-off may make that purchase more realistic, Burmaster said.
“If I can write that whole thing off in one year, it’s going to be a big plus,” he said.
Alice Villasenor, a real estate broker with Heritage Moultray Real Estate Services in Yakima and the newly installed president of the Yakima Association of Realtors, said she’s been trying to learn about the tax changes by watching videos from the National Association of Relators.
One area she thinks she’ll realize savings is through a 20 percent deduction in business income. Real estate agents, generally, are independent contractors and often include business profit (or loss) as part of personal income. A deduction of net business income would reduce the amount of personal taxable income.
She isn’t sure of how much she could save, though she is anticipating sizable relief.
“It gives me more money at the end of the day to put back into the business,” she said. “If there’s money left over it can go into retirement or savings.”
She’s also relieved the tax plan left a provision allowing home buyers who sell their primary residence to claim an exemption from capital gains taxes.
Earlier versions of the bill had looked to increase the amount of time the seller needed to keep the home as their primary residence to be eligible for the exemption.
One proposal put the requirement for five of the eight years prior to the date the home was sold.
The current requirement, instead, stuck: two of the last five years before the home sale.
“It could’ve been a big hit (on home sales),” she said. “We’re excited that did not get changed.”