Key Tax Law Changes Checklist for Businesses
As we get closer to year-end, we thought it would be helpful to review some of the key tax law changes that come into play for businesses in 2018.
* Section 179 Deduction. Increased the maximum annual Section 179 deduction to $1 million and increase the deduction phase-out threshold to $2.5 million
* Bonus Depreciation. Unlimited 100% first-year depreciation for new or used qualified assets acquired and placed in service after 9/27/17 and before 1/1/23.
* Qualified Business Income Deduction. Allows an individual taxpayer to deduct 20% of qualified business income. There are limitations for certain businesses and a wage and/or asset limitation for taxpayers with income over threshold amounts.
* Corporate Tax Rate. C corporation income is now taxed at a flat 21% rate for tax years beginning in 2018 and beyond. The rate for personal service corporations would be a flat 21%.
* Net Operating Losses (NOLs). Taxpayers can use an NOL carryover to offset only 80% of taxable income (versus 100% under old law). In addition, NOLs cannot be carried back to earlier tax years but can be carried forward indefinitely.
* More Businesses Can Use Cash-method Accounting. The new law allows businesses to use the cash method of accounting if its annual gross receipts for the prior three years doesn’t exceed $25 million.
* Limits on Deducting Interest Expense. Deductions for business interest expense in tax years beginning in 2018 and beyond is limited to the sum of business interest income plus 30% of adjusted taxable income (subject to exceptions).
* Eliminated Deduction. The domestic production activities deduction has been eliminated and replaced by the new Qualified Business Income Deduction.
If you have questions or want more information, please contact John Csargo at jcsargo@myboyum.com.