Archive for November, 2018

Pleasant 2018 Tax Filing Surprise Possible

November 9, 2018

A nice surprise is in store for many small businesses at the end of this year’s tax preparation cycle.

Uncle Sam’s tax bite will be less for many companies according to experts because of the reforms implemented by President Trump’s new tax bill will lessen the tax bite Uncle Sam gets from ongoing companies.

But changes made by The New Tax Cuts and Jobs Act of 2017 means it is important to talk to your Tax Advisor now. There is still time to implement changes to your business based on the new tax bill.

While savings can differ from company-to-company most experts think small businesses really benefit from the tax bill.

To help small business taxpayers maximize savings legally with the changes that impact 2018 returns, here are some year-end tax planning questions you should consider.

Business Tax Changes:

Does your business income qualify for the 20% pass-through deduction? If not, should you switch to a C corporation to take advantage of the 21% corporate tax rate?
If your business does not qualify for the 20% pass-through deduction because it is one of the Specified Services Trades or Businesses, consider taking steps to reduce your income below the thresholds ($157,500 for a single taxpayer, $315,000 for a married taxpayer) to avoid this limitation.
If you are planning on starting a new company, are you planning to sell the company in 5-10 years? If so, consider forming as a C corporation to take advantage of the Section 1202 tax-free gain rules.
If you live in a high-tax state, consider your alternatives to paying tax as a business instead of personally to receive the deduction for state taxes or make state-tax-credit-effective contributions in your business to avoid the limitation on individual state-tax-credit contribution deductions.

Maximize Real Estate Investment Deductions:

Do you need to invest in real estate to take advantage of the bonus depreciation to offset other taxable income?
If you are a commercial real estate investor, consider if you need to replace your roof or any HVAC units as these are now deductible.

As a real estate investor, are you maximizing the new 20% pass-through deduction?

Maximize Retail Deductions:

If you own a retail establishment, consider whether to change your accounting method to maximize new inventory deductions.

Maximize Business Automobile Deductions:

Can you establish a home office to increase your automobile deductions?

Do you need a new car? If so, do you want to consider an SUV or truck over 6,000 pounds to take advantage of the 100% write-off of the business use portion?

Finally, Make Critical Personal Decisions:

Are you contemplating a divorce? If so, the divorce must be finalized by 12/31/18 if you still want to deduct your alimony going forward.

Do have children and want to share money with them? There are changes in the way you can legally shift some of your 2018 income to your children.

Keep in mind, the IRS still haven’t ironed out or published all of the new changes. What it has done is give professionals road signs to help them guide clients.

Talk to them now, not when it is too late.

* Note: The New Tax Bill Is Positive For SMBs was the topic of my February