The plan, announced at a news conference at Trump Tower in New York, proposes significant reductions for the majority of small business owners, who operate so-called pass-through entities including limited liability corporations (LLCs) and S corporations. These business owners currently pay taxes at the individual level, often at the highest taxable rate, near 40 percent.
"Right now, freelancers, sole proprietors, unincorporated small businesses, and pass-through entities are taxed at the high personal income tax rates," the tax plan reads. "This treatment stifles small businesses."
Here are five takeaways for small businesses from Trump's tax plan:
1. Pass-through entities would see their income taxes decrease to a rate that would match the new proposed corporate tax rate of 15 percent.
2. The tax on the wealthiest, defined as single earners making $150,000 or more (and married filers jointly pulling in $300,000 or more), would pay a 25 percent income tax. That compares with a tax rate near 40 percent today. Long-term capital gains for the wealthy would be fixed at rates between 15 and 20 percent, which is generally what the rate is today.
3. Corporate taxes would drop to 15 percent, from a current upper threshold of 35 percent today. The Trump plan would also allow companies that have been stock-piling cash overseas to repatriate it with a one-time 10 percent fee. Trump would also close the loophole that lets corporations defer taxes by banking funds overseas. Instead, companies would pay taxes on income at the time it is earned, which would discourage companies from establishing operations in foreign countries.
4. Business expenses. The plan would place unspecified caps on business interest expense deductions. Interest on debt is currently fully deductible.