2018 Business Tax Changes | Karla Dennis & Associates

2018 Business Tax Changes 

The Tax Cuts and Jobs Act (TCJA)  has some new provisions that dramatically affect businesses and individuals. If you are a 1099 employee, or own a small business, the 2018 business tax changes is a big win. Here are some of the notable 2018 small business tax changes.

Corporate Tax Cuts

 Corporations will see a big drop in their rate from 35% to 21%. These changes alone are estimated to increase average family income by more than $4,000. The idea behind the $4,000 estimate is this: Corporations will use their new tax savings to invest more in their companies, create more jobs and pay higher wages. An increase of family income of $4,000 are estimated from these changes.

Corporate Alternative Minimum Tax 

The Alternative Minimum Tax (AMT) was designed to reduce a taxpayer’s ability to avoid taxes by using certain deductions. Both corporate and non-corporate taxpayers experienced this. With the new tax cuts, the AMT has been repealed on corporations. The tax cut also allows corporations to offset regular tax liability by any minimum tax credit they may have for any tax year.

Individual Alternative Minimum Tax

 While corporations catch a break with the AMT repeal, individuals look forward to an increase in the exemption amounts. This will make it less likely to hit at lower income levels. Before the tax cut; exemption for individuals were $55,400 and $86,200 for married filing jointly. The increase in exemption for individuals is raised to $70,300 and $109,400 for married filing jointly. It will also increase the phase-out threshold to $500,000 for singles and $1 million for joint fliers. Read more about other 2018 Tax Deductions changes to see adjustments to the Child Tax Credit and Medical deductions click Here.

Full and Immediate Expensing

 The Tax Cut and Job Act will allow companies to fully and immediately deduct the cost of certain equipment purchased and qualified property acquired. The provision applies to both new and used property. This provision heightens the importance of Cost Segregation studies with investment properties. Cost identified as tangible personal property and land improvements are eligible for immediate expensing. This applies to new construction or acquired property.

Pass-Through Business Income

The Tax Cut and Jobs Act will allow a 20 percent deduction for businesses who have a pass-through entity. This is one of the biggest overhauls for the 2018 business tax changes. Under the old tax code, income from these small businesses would pass-through to the owner on her own taxes and were subject to individual income tax rates. Entrepreneurs are now subject to a tax break on the income their businesses generate, but many of them face a key decision. Is it now time to incorporate? If so what entity should I choose? To speak with a tax professional on which entity is right for you click Here

The one thing that’s clear through all of this is that taxes are complicated.  Even the IRS is scrambling to keep up with all the changes in the new tax reform bill.

Add to the fact that millions of Americans over pay their taxes each year, and it’s easy to see why you need a tax professional now more than ever. Let a tax professional handle the heavy lifting of tax preparation. No more overpaying! Just one missed deduction could cost you far more than the fee of a professional.