Saturday, September 30, 2023

How the Tax Reform May Impact Your Small Business.

April 30, 2018 by  
Filed under Business, Money, Opinion, Politics, Weekly Columns

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( Under the new tax reform, many changes are coming for businesses around the country. On everything from tax rates to deductions, businesses have a lot to look forward this year. If you are a business owner, you might want to make some changes to take advantage of these tax reforms. To get up to speed on the latest tax reforms, here are the potential major impacts your business below.

The 20% Deduction for Small Business

This year, most companies that are structured as pass-through entities will receiving a 20% deduction on taxable income. The deduction will impact mostly S-Corp and Single Member LLC businesses. On top of that, it only applies to business income below the revenue levels of $157,500 for single filers and $315,000 for married joint filers.

Slashing the Corporate Tax Rate For Big Business

At the other end of the spectrum, corporations are receiving a cut in corporate taxes. Across the board, the federal corporate tax rate will decrease from 35% to 21%. The added cash flow will allow larger companies to invest further in the region, hire more employees and pay higher dividends to investors.

Carrying Net Operating Losses For Businesses

Under the new tax reform, businesses can no longer carry losses back (with the exception of farming businesses). However, all businesses are allowed to carry losses forward indefinitely. This is a major change for local businesses who have run in loss in previous years or the current year. You can plan to have those losses written off against taxable income in the future.

Increased Depreciation Limits for Vehicles

Moreover, businesses have higher depreciation limits on new and used vehicles. You can deduct $10,000 per year in depreciation. Additionally, you can deduct up to $18,000 in the first year for passenger vehicles while SUVs and trucks are eligible for a 100% deductible. If you happen to get into an accident, you can write off the totaled car value at a higher cost with these new limits. Of course, these new tax rules apply to vehicles used for business purposes.

More Accounting Options For Corporations

Finally, C-Corps get some additional flexibility with more accounting method options. Previously, C-Corporations were not allows to use the cash method of accounting if they generated more than $5M in revenues. However, now the threshold has been changed to $25 million so that more C-Corps can use the cash accounting method, which is much more convenient to account for income when it is credited to the bank accounts.

The major changes that have taken effect can have an overwhelming positive impact on businesses. Whether you own an S-Corp, Sole Proprietorship, LLC or C-Corp, there are many new reforms that can help your business grow with employees. Make sure you talk to your accountant about how to take advantage of the deductions, write offs, accounting methods and operating losses. Surely, they can help you find positive impacts of the tax reform for your business.

Staff Writer; Karl Harris

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