IF YOU OWN A BUSINESS, YOU NEED A CPA ON TOP OF THE NEW TAX LAWS

There is a lot of talk about the changes in meals and entertainment deductions and there is good reason but is the information correct.  Does it apply to your circumstances?  Is there a way to change how deductions are handled so they conform to the code so they are fully deductible? If not, how do you prepare for the changes and how does this change your taxes. Having a CPA that is on top of the new laws and will work with you to make sure as soon as possible to adjust the advice from “yester-year.”  By the way the entertainment expense as we know it, is no longer deductible.

Now let’s talk about some of the good stuff, the way to boost the economy, it to give people purpose to buy stuff.  Bonus depreciation has been increase to 100% deduction instead of 50% and is now allowed to include used qualified property where the prior law had an original use rule.  This is a big advantage for business who use expensive pieces of equipment for production.  Also this may be the right time for you to do some interior qualified improvements to your operating facilities.  If congress adjusts the proper wording as they say they meant to, these improvements may qualify for bonus depreciation also. 

Most business owners have heard of 179.  This is the opportunity to expense 100% of the cost of qualified property in the year placed in service, give certain limits.  For 2018 and the next few years, $1 Million dollars of qualified assets can be expenses as long as you do not purchase more than $2.5 Million of assets in that year.  But with Bonus depreciation, it almost makes this obsolete.

20% seems to be a buzz word.  So what does 20% mean to you?  If you are a C-Corporation, a flat 21% is in your tax rate.  20% was the requested rate from President Donald Trump but 21% was the final result.  As for “Pass-Thru” businesses (partnerships, S-Corps) and Schedule C filing sole-Proprietors, depending on your line of business, you should see the benefit of a 20% deduction on the net taxable income of the business.  Again, see your CPA on this.  If you are a professional business, you have to meet certain other thresholds to qualify.

Also for individuals, there are some changes to your itemized deductions.  Miscellaneous itemized deductions are big for those who receive a W-2 and pay a substantial amount for out of pocket expenses.  Companies with industries that have a large workforce in this circumstance need to consider a reimbursement program for these expenses in lieu of some wages.  There has to be some compromise here because it is a lose-lose for both the employer and the employee to not make the adjustment.

The most important thing immediately for employees is to fill out a new W-4 to get the best benefit of the tax changes for your paycheck.

The most important thing immediately for business owners is to start having conversations with their CPA about the changes that will affect their business.



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