New Law Change Will Save Peoria Business Owners Thousands On Federal Taxes
As many as 400,000 small business owners in Illinois will now be able to save thousands on their federal taxes thanks to a recent change in the state tax law.
Senate Bill 2531 will allow small businesses to be exempt from a $10,000 cap on State and Local Tax deductions. Introduced by State Sen. Win Stoller, R-Germantown Hills, the bill passed out of Springfield with bipartisan support.
Paola Hinton is the owner of Five Senses Spa, Salon and Barbershop in Peoria. She said the law change levels the playing field between small businesses and large corporations.
"When we have additional rules put on us, it's extremely stressful," she said. "That is so unfair when small business, who has to work so hard for every earned dollar, has to work that much harder and has different rules than the big companies. ... It's nice to be able to know we are finally going to have something to par with the large corporations out there."
Hinton discussed the new tax law alongside other small business owners and community leaders during a press conference on Tuesday at Great Harvest Bakery Co., 9010 N. Allen Rd., in Peoria.
Stoller said his bill utilizes an IRS-approved method; state and local taxes are still being paid, however, the federal government will now allow business owners in Illinois to deduct those costs from their federal returns.
The relief comes "at no cost to Illinois," he said, "all of the savings is on the federal side."
The 2017 Tax Cuts and Jobs Act intended to use the $10,000 State and Local Taxes (SALT) tax deduction cap to target large corporations. But small businesses organized as "pass-through businesses" — also known as "S-corps" — suffered in the process, Stoller said. Between 80 and 95 percent of businesses in Illinois are pass-through businesses.
Stoller may have been uniquely qualified to pitch this tax workaround. Of the 177 lawmakers in Springfield, Stoller said he is one of four CPAs representing Illinoisans. Of those four CPAs, he added, he is the only one who is actively running a small business.
The bill received unanimous bipartisan support, Stoller said.
"I reached across the aisle. I had 14 Democrat senators and 17 Republican senators co-sponsor my bill," he said. "Now that my bill is law, over 400,000 small business owners will have the opportunity to save significant dollars on their federal tax return."
Russell said she's been "lucky" to maintain her businesses and employees, but she still feels like she's in survival mode.
"The savings we're gonna get from this bill are gonna allow us to thrive and succeed coming outside of COVID," she said. "It isn't going to cost Illinois anything. I'm all about paying my fair share of taxes, but at this point, when it gets me on that same level as a federal corporate return, that is awesome."
Joshua Gunn is the president of the Peoria Area Chamber of Commerce, a group that represents thousands of business owners. The law change is much-needed relief coming out of the pandemic, he said.
"It's really challenging to put your life, blood sweat and tears into a business, add COVID to it, add challenging taxation situations," he said. "You can feel that passion from these business owners. This is a little bit of relief on the horizon that we can celebrate."
For Five Senses Spa, the tax relief couldn't come at a better time.
Hinton said she's still reeling from pandemic-related hardships: Five Senses was closed for three months during the pandemic; some workers have yet to return to work; those who have returned are earning higher wages, which has led to higher costs for services; PPE costs are mounting as the Delta variant spreads.
And next month, property taxes are due. Five Senses' building's bill is $42,000. Hinton must pay half that next week.
"That's a lot of haircuts," she said.
Stoller, of Germantown Hills, was elected to the Illinois General Assembly last year. He is the CEO of Widmer Interiors. Stoller received an MBA from the University of Illinois and his career includes work as an auditor for PricewaterhouseCoopers.