www.qns.com I LIC COURIER I JUNE 2018 43
TAX TIPS
5 Small
Business
Tax Items BY JOHN SAVIGNANO, CPA
Big business entities, including multinational corporations, are
expected to reap the main tax rewards under the TCJA.
Alert: e new law doesn’t ignore small businesses. Beginning in
2018, it provides plenty of tax-saving opportunities for small business
owners, although you’ll also face some tax obstacles.
Unlike the tax provisions for individuals, most business-related
provision in the TCJA are permanent. Here are 5 key tax changes that
deserve your immediate attention.
1.
Pounce on lower tax rates. Prior to the new law, corporations
were taxed under a graduated taxrate structure with a top rate of
35%. e new law replaces this rate structure with a at rate of 21%.
us, the eective tax rate for the majority of C corporations is
lowered.
Tip: e TCJA also reduces the dividends-received deduction from
80% to 65% if a corporation owns 20% of the stock of another
corporation (from 70% to 50% for other).
2.
Max out on Section 179. e TCJA almost doubles the
maximum Section 179 expensing allowance from $510,000 for
tax years beginning in 2017 to $1 million for 2018 and increases the
deduction phaseout threshold from $2.03 million for tax years
beginning in 2017 to $2.5 million for 2018. us, many small
businesses can currently deduct the entire cost of qualied property
placed in service in 2018.
Tip: e deduction is still limited to your income from business
activities.
3.
Seize bonus depreciation. For the next ve years, your business
can claim 100% bonus depreciation, up from 50% in 2017, for
qualied business property placed in service. Aer 2022, the
deduction is reduced incrementally, as shown below, before it
disappears completely aer 2026.
Tip: Qualied business property is expanded to include used, not just
new, property.
4.
Ride in tax luxury. Depreciation deductions for so-called
“Luxury cars” for business drivers are limited to relatively modest
amounts. However, under the law, the annual limits for luxury cars
are boosted. For example, if you acquire a used business car in 2018,
the maximum rstyear deduction for 100% business use is $10,000. (It
was $3,160 in 2017.)
Tip: A business car may also be eligible for bonus depreciation of
$8,000.
5.
Pass through a deduction. For the rst time ever, the owners of
many pass-through entities such as partnerships, S corporations,
limited liability companies and sole proprietorship can deduct 20%
of net business income on the personal returns. In eect, you’re only
taxed on 80% of your small business income. But this provision
includes restrictions against gaming the system. Notably, the
deduction is phased out for owners of most service businesses, other
than architects and engineers. Everyone else from photographers to
plumbers is covered.
Tip: is restriction doesn’t apply to single lers with taxable
income up to $157,500 and up to $315,000 for joint lers.
John Savignano is a partner with Savignano Accountants & Advisors
located at 47-46 Vernon Blvd., Second Floor, in Long Island City. If
you have any questions or require additional information, please call
John at 718-707-0955.
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