With bonus depreciation, a business can recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The Tax Cuts and Jobs Act (TCJA), signed into law in December, enhances bonus depreciation. Typically, taking this break is beneficial. But in certain situations, your business might save more tax long-term by skipping it. That said, claiming bonus depreciation on your 2017 tax return may be particularly beneficial. Pre- and post-TCJA Before TCJA, bonus depreciation was 50% and qualified property included new tangible property with a recovery period of 20 years or less (such as office furniture and equipment), off-the-shelf computer software, water utility property and qualified improvement property. The TCJA significantly expands bonus depreciation: For qualified property placed in service between 9/28/17, and 12/31/22 (or...

As posted by Thomson Reuters on 2/12/18 On 2/9/18, Congress passed, and the President signed into law, H.R. 1892, the "Bipartisan Budget Act of 2018" (the Budget Act). In addition to providing a continuing resolution to fund the federal government through 3/23/18, this 2-year budget contains a host of tax law changes. The Budget Act retroactively extends through 2017 over 30 so-called "extender" provisions, provides a number of miscellaneous tax-related provisions, and includes tax relief to victims of the California wildfires and Hurricanes Harvey, Irma, and Maria. The following general topics are outside the scope of this Tax Planning Letter: Non-extender tax-related provisions Disaster relief provisions INDIVIDUAL EXTENDER PROVISIONS The Budget Act extended the following individual provisions for one year: Exclusion for discharge of indebtedness on a principal residence...

As posted by Thomson Reuters on 1/23/18 Enacted on 12/22/17, the Tax Cuts and Jobs Act (TCJA) added §199A, which applies to tax years 2018-2025. Under this new provision, individuals, estates, and trusts may deduct up to 20% of their Qualified Business Income (QBI) from sole proprietorships (including farms) and pass-through entities. This means that the QBI of taxpayers in the new 37% tax bracket may be taxed at an effective top marginal rate of 29.6%. Although §199A can greatly benefit many noncorporate taxpayers, it's one of the more convoluted provisions of the TCJA. It contains various rules and limits that can substantially reduce or eliminate the deduction. Given this, a step-by-step guide to claiming the deduction would be helpful. This Tax Planning Letter examines in detail...

Tax credits reduce tax liability dollar-for-dollar, potentially making them more valuable than deductions, which reduce only the amount of income subject to tax. Maximizing available credits is especially important now that the Tax Cuts and Jobs Act has reduced or eliminated some tax breaks for businesses. Two still-available tax credits are especially for small businesses that provide certain employee benefits. 1. Credit for paying health care coverage premiums The Affordable Care Act (ACA) offers a credit to certain small employers that provide employees with health coverage. Despite various congressional attempts to repeal the ACA in 2017, nearly all of its provisions remain intact, including this potentially valuable tax credit. The maximum credit is 50% of group health coverage premiums paid by the employer, if it contributes at least...

Along with tax rate reductions and a new deduction for pass-through qualified business income, the new tax law brings the reduction or elimination of tax deductions for certain business expenses. Two expense areas where the Tax Cuts and Jobs Act (TCJA) changes the rules — and not to businesses’ benefit — are meals/entertainment and transportation. In effect, the reduced tax benefits will mean these expenses are more costly to a business’s bottom line. Meals and entertainment Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee. Under the new law, for amounts paid or...