Business Provisions:

Changes effective in 2018 (unless otherwise stated)

We’ll give you the good news first:

  • New tax rate for C-corporations – flat 21%
    • Also, corporate AMT was repealed
  • Small business deduction – applies to qualified business income of “passthrough entities”
    • Sole proprietorships
    • Rental property
    • Partnership
    • LLC (not taxed as a C-corporation)
    • S-corporation
    • Rules are extremely complex (especially for service businesses), but if you think this may apply to you, please click here for a simplified chart to help you navigate the rules
  • Increased expensing for newly acquired assets
    • 100% bonus depreciation on eligible property for 5 years
    • Retroactive to September 28, 2017
    • Applies to new or used assets purchased on or after that date
    • Expanded Section 179 expensing
  • Vehicle depreciation limits have also increased for autos used in a business

On the negative side, these business deductions are limited or no longer available:

  • Entertainment deduction has been repealed. Expenses below (among others) are no longer deductible:
    • Golf outings
    • Fishing trips
    • Tickets to professional sporting events
    • Theater tickets
    • Meals (in certain circumstances)
  • Employees may no longer deduct moving expenses, and employer reimbursement for these expenses is considered wage income
  • Employees may no longer deduct job-related expenses. Expect these employees to request reimbursement for these expenses
  • New rules for new business losses (NOL’s) – a few listed below:
    • No carryback allowed
    • NOL deduction limited to 80% of taxable income
      • No longer possible to zero out taxable income with new NOL’s

 

The provisions listed above represent the most common changes and are simplified for illustration. The new rules are extremely complex and can affect each client differently, therefore we recommend you consult with your tax advisor (and/or business attorney) for further details and clarification on the new tax law.

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