Here Are Some Major TCJA Changes Affecting Your Small Business

By this point, small businesses (and their owners) have either filed their 2017 income tax returns or filed for an extension. Now is the time to go over several provisions of the Tax Cut and Jobs Act (TCJA) that might significantly affect taxes for 2018 on out. The changes typically impact tax years beginning after December 31, 2017, and, unless specifically stated, are permanent.

Corporate taxation

  • Replacement of graduated corporate rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Replacement of the flat personal service corporation (PSC) rate of 35% with a flat rate of 21%
  • Repeal of the 20% corporate alternative minimum tax (AMT)

Pass-through taxation

  • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025
  • New 20% qualified business income deduction for owners — through 2025
  • Changes to many other tax breaks for individuals — generally through 2025

New or expanded tax breaks

  • Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023
  • Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million (these amounts will be indexed for inflation after 2018)
  • New tax credit for employer-paid family and medical leave — through 2019

Reduced or eliminated tax breaks

  • New disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
  • New limits on net operating loss (NOL) deductions
  • Elimination of the Section 199 deduction, also commonly referred to as the domestic production activities deduction or manufacturers’ deduction — effective for tax years beginning after December 31, 2017, for noncorporate taxpayers and for tax years beginning after December 31, 2018, for C corporation taxpayers
  • New rule limiting like-kind exchanges to real property that is not held primarily for sale (generally no more like-kind exchanges for personal property)
  • New limitations on excessive employee compensation
  • New limitations on deductions for certain employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

Don’t wait to start 2018 tax planning

This is just a small taste of the major changes TCJA makes, impacting small businesses and their owners starting this year. More rules and limits apply, as well. The resulting effect of these changes should play a role for you and your business, guiding you toward the tax strategies you will want to implement in 2018, including how to time income and expenses to your tax advantage. The earlier you start the tax planning process, the better equipped you will be to take advantage of tax-saving opportunities available to you. We would be happy to assist you as soon as possible. Click here to have someone contact you or call us at 818-334-8623.