Although the drop of the corporate tax rate from a top rate of 35% to a flat rate of 21% may be one of the most talked about provisions of the Tax Cuts and Jobs Act (TCJA), C corporations aren’t the only type of entity significantly benefiting from the new law. Owners of non-corporate “pass-through” entities may see some major — albeit temporary — relief in the form of a new deduction for a portion of qualified business income (QBI). A 20% deduction For tax years beginning after 12/31/17, and before 1/1/26, the new deduction is available to individuals, estates and trusts that own interests in pass-through business entities. Such entities include sole proprietorships, partnerships, S corporations and, typically, limited liability companies (LLCs). The deduction generally equals...

Claim for the Last Time on Your 2017 or 2018 Tax Return Based on Entity Type While many provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) will save businesses tax, the new law also reduces or eliminates some tax breaks for businesses. One break it eliminates is the §199 deduction, commonly referred to as the “manufacturers’ deduction.” When it’s available, this potentially valuable tax break can be claimed by many types of businesses beyond just manufacturing companies. Under the TCJA, 2017 is the last tax year non-corporate taxpayers can take the deduction (2018 for C corporation taxpayers). The basics The §199 deduction, also called the “domestic production activities deduction,” is 9% of the lesser of qualified production activities income or taxable income. The deduction is...

The Tax Cuts and Jobs Act (TCJA) enhances some tax breaks for businesses while reducing or eliminating others. One break it enhances — temporarily — is bonus depreciation. While most TCJA provisions go into effect for the 2018 tax year, you might be able to benefit from the bonus depreciation enhancements when you file your 2017 tax return. Pre-TCJA bonus depreciation Under pre-TCJA law, for qualified new assets that your business placed in service in 2017, you can claim a 50% first-year bonus depreciation deduction. Used assets don’t qualify. This tax break is available for the cost of new computer systems, purchased software, vehicles, machinery, equipment, office furniture, etc. In addition, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the...

As posted by Thomson Reuters on 12/22/17 On 12/22/17, President Trump signed into law H.R. 1, the “Tax Cuts and Jobs Act,” a sweeping tax reform law that will entirely change the tax landscape.  The legislation reflects the largest major tax reform in over three decades. This Tax Planning Letter, which refers to the Act by its commonly used name, “Tax Cuts and Jobs Act”(or simply, the “Act”) describes key changes made under that Act that would affect sole proprietorships, S corporations, partnerships, tax-exempt organizations, electing small business trusts, and retirement plans, including a new deduction for pass-through income. For comprehensive summaries on other areas of the new law, see: (#243) Highlights of the “Tax Cuts and Jobs Act”- Business Tax Changes (#244) Highlights of the “Tax Cuts and Jobs...

As posted by Thomson Reuters on 12/22/17 On 12/22/17, President Trump signed into law H.R. 1, the “Tax Cuts and Jobs Act,” a sweeping tax reform law that will entirely change the tax landscape. The legislation reflects the largest major tax reform in over three decades. This post, which refers to the Act by its commonly used name, “Tax Cuts and Job Act” (or simply, the “Act”) describes key individual tax changes that are made under the Act.  This comprehensive tax overhaul dramatically changes the rules governing the taxation of individual taxpayers for tax years beginning before 2026, providing new income tax rates and brackets, increasing the standard deduction, suspending personal deductions, increasing the child tax credit, limiting the state and local tax deduction, and temporarily reducing the medical expense...

As posted by Thomson Reuters on 12/22/17 On 12/22/17, President Trump signed into law H.R. 1, the “Tax Cuts and Jobs Act,” a sweeping tax reform law that will entirely change the tax landscape. The legislation reflects the largest major tax reform in over three decades. This post, which refers to the Act by its commonly used name, “Tax Cuts and Job Act” (or simply, the “Act”) describes key business tax changes that are made under the Act.  Among the changes are a permanent reduction in the corporate tax rate to 21%, repeal of the corporate alternative minimum tax (AMT), imposition of new limits on business interest deductions, and a number of changes involving expensing and depreciation. For comprehensive summaries on other areas of the new law, see: (#244)...