The Tax Cuts and Jobs Act (TCJA) brought about significant change for C corporations with its 21% federal income tax rate. However, there are still fundamental truths that apply to these corporations that are unchanged.
The depreciation period for commercial buildings and improvements is generally 39 years. During this period part of the cost can be depreciated each year. However, new tax breaks allow deductions to be taken more quickly are available for certain real estate investments. The Tax Cuts and Jobs Act (TCJA) has enhanced many of these new breaks and can lead to a bigger benefit when filing for your 2018 tax return. However, a drafting error in the TCJA has prevented the use of a couple of these breaks.
The Republican tax plan that was passed at the end of 2017 altered many well-established tax provisions for C corporations, flow-through entities and sole proprietorships alike. This tax reform bill, now called the Tax Cuts and Jobs Act (TCJA), changed a few guidelines for non-corporate entities when it added Section 199A into the tax code.
Now that 2018 has drawn to a close, the options for reducing your tax liability are slim. One option that is still available to reduce liability is to pay 2018 employee bonuses now and deduct them on your 2018 tax return. Often, businesses can deduct bonuses earned by employees if they are paid within 2 ½ months after the end of the tax year (March 15 for a calendar year company).
The Tax Cuts and Jobs Act (TCJA) has expanded the availability of the cash method of accounting for federal tax purposes. The cash method allows businesses more flexibility in tax-planning, which could allow deferment of taxable income. It may be a good idea for newly eligible companies to look into the cash method and the benefits it can provide.
Gifts to customers are deductible up to $25 per customer per year. This limit does not include “incidental” costs that do not substantially add to the value of the gift. Incidental costs include engraving, gift-wrapping, packaging, and shipping. Branded marketing collateral is also excluded from the $25 limit; this includes items costing less than $4 and widely distributed such as pens or stress balls with your company’s name and logo printed on them.
The risk of tax identity theft for individuals is widely known, but a new concern is businesses becoming targets. Identity thieves are smarter than in the past: they often know filing practices, the tax codes, and the best ways to get valuable data.
Retirement plans can be a great benefit to businesses. Beyond attraction and retention of employees, offering a retirement plan gives your business access to significant tax deductions. A SIMPLE IRA is often a good retirement plan option for small businesses. This year the deadline for setting up a SIMPLE IRA is October 1, 2018. It is important to weigh your options and decide soon if a SIMPLE IRA is the best retirement plan for your business.
Keeping a business in the family is one of the more significant concerns for family business owners wanting to pass their company to the next generation. Tax-wise, succession planning is best begun long before the business is to be transferred.
The Tax Cuts and Jobs Act narrowed the requirements for claiming a home office deduction; employees are no longer eligible. However, a home office deduction may be available to you if you run a business from your home or are otherwise self-employed and use part of your home for business purposes.