Questions About The New Tax Law? We Have the Answers For Your Business.
With the passage of the Tax Cuts and Jobs Act, which was signed into law in December 2017, most taxpayers can expect to see significant changes to their 2018 federal tax return. At a high-level, some of the changes affecting businesses are listed below. For a more detailed conversation about these changes, please call us or make an appoint to come into the office for a visit. We look forward to hearing from you.
Changes Affecting Only C-Corporations
- Reduction in C-corporation tax rate to 21%.
- Reduction in dividend received deduction.
- Corporate Alternative Minimum Tax is repealed.
Changes Affecting All Business Entities
C-Corporation, S-Corporation, Partnership, LLC, and Sole Proprietor
- Section 179 deduction increases to $1 M, up from $510,000 in 2017. The phase out threshold begins at $2.5 M of assets placed into service.
- Bonus Depreciation deduction is increased to 100% for qualifying assets. Sport Utility Vehicles (>6,000 lbs) are eligible for 100% bonus depreciation.
- Passenger automobile depreciation limits increased.
Deductions No Longer Deductible in 2018
- Research and Development Expenditures need to be capitalized and amortized over 5 years.
- Entertainment expenses for businesses.
- Deduction for employee transportation fringe benefits, such as parking and mass transit permits issued to employees.
- Domestic production activities deduction.
Deductions Limited in 2018
- The interest expense is limited to interest income and 30% of adjusted taxable income. This limit does not apply to small businesses.
Other Tax Changes for Businesses
- Net Operating Losses no longer may be carried back two years. Carryforward is indefinite.
- IRC §1031 Like-Kind Exchanges are limited to real property and gain on tangible personal property can no longer be deferred.
- Taxpayers with pass-through income (recipients of K-1s) may be eligible to deduct 20% of their qualified business income on their personal returns.
- The 50% limit on deductibility of business meals is expanded to meals provided through an in-house cafeteria or one on the premises of the employer.
- New credit for employers offering Paid Family and Medical leave for greater than two weeks.
- Any business with gross receipts less than $25 M is not subject to uniform capitalization rules and is not required to capitalize direct and indirect costs associated with real or tangible property manufactured by a business.
- Construction companies with annual gross receipts less than $25 M do not have to use the percentage-of-completion method to account for long-term contracts.