With all the speculation going around over the last few months about a comprehensive tax overhaul, the Senate, House of Representatives and the President finally came to an agreement on the new tax plan that will take effect January 1, 2018. The new law won’t affect your 2017 taxes that you’ll be filing this year, but it’s beneficial to begin tax planning sooner than later. A few items that will benefit you and your business are:
- Lowering of the corporate tax rate from a progressive rate to a flat 21% tax rate.
- If you have an LLC, S-Corp, partnership or sole-proprietorship there is a 20% Pass-through income deduction for certain businesses. As this is a brand-new deduction to the tax code and there’s many phase-outs, exceptions & thresholds, it makes this the most complicated change to the new tax code.
- Congress expanded the bonus depreciation allowing businesses to write off 100% of the cost of qualifying property in the year it’s placed in service until the year 2022.
- An item that could potentially decrease your business deduction is the limit placed on interest deductions.
- The new law only allows you to deduct interest expenses equal to 30% of EBITA (Earnings before Interest, Taxes, Depreciation, Amortization).
In addition to the many changes to the business tax code, Congress made many changes to the personal tax code.
- The child tax credit was increased from $1,000 per qualifying dependent to $2,000.
- The deduction for mortgage interest was reduced to limit the amount of acquisition indebtedness from $1,000,000 to $750,000.
- This means if you have a principal home mortgage balance great than $750,000 the deduction amount for interest paid will be limited. This only applies to homes that were in contract after December 15, 2017.
- One of the more controversial changes was to the state and local tax deduction.
- You may now only deduction $10,000 total between state and local income tax, real estate taxes and property taxes.
- Alimony Deduction/Income recognition
- For divorce decrees settled after December 31, 2018, the alimony paid won’t be considered a deduction, and the alimony received won’t be recognized as income.
I recommend contacting a tax advisor for a more in-depth look at how these changes will affect you and your business. If you have any questions or would like additional information, please call 702-623-2500 to speak with a consultant at Corporate Capital, Inc. and they will get with Josh McLain, CPA at Corporate Capital.
Josh McLain, CPA
Director of Tax
Please note we will try and accommodate all those who call or email but tax season is right around the corner. If you have questions, call today. It’s an important year!