Blog

Call us: (801) 281-4700
Portal Login

Recent Posts:


  • PPP Loan Forgiveness ... HELP!

  • Employee Payroll Tax Deferral

  • Welcome Shields & Company CPAs

  • Which Business Entity is Right for ME?

  • Retirement Plan Options for the Self-Employed - while there's still time

  • Tax Cuts and Jobs Act - 2018: Taxation made simple

  • Tax Credits and Deductions for Business Owners

  • Business Owners Open Forum & Training Courses


  • Tax Cuts and Jobs Act - 2018: Taxation made simple

    The Tax Cuts and Jobs Act was recently passed. Here are some of its key provisions.

    Individual Overview:

    • Sunsets after 2025 unless modified
    • Individual rates move from 10, 15, 25, 28, 33, 35 and 39.6% to 10, 12, 22, 24, 32, 35, and 37%
    • Capital gains rates (0% for 10, 15; 15% for 22, 24, 32; 20% for 35, 37 roughly)
    • Kiddie tax rates same as Trust rates
    • ACA taxes of 3.8% and 0.9% are retained
    • AMT – modified, not repealed
    • Child tax credit – increased from $1,000 to $2,000, $500 for other qualifying dependents
    • Personal exemptions – suspended
    • Moving expense deduction – suspended
    • Alimony deduction – suspended (post 2018 divorce instruments)
    • NEW Deduction for Pass-Through Income
    • Standard deduction – nearly doubled
    • Medical expense deduction – floor moved from 10% to 7.5%
    • Deduction for state and local taxes limited to $10,000 (affects vacation rentals) see also IR-2017-210 re:  no deduction before tax is “assessed”
    • Miscellaneous itemized deductions - suspended
    • NOL carryback - suspended
    • Due diligence requirement on preparer for Head of Household designation

    Taxation Simplified:

    • Rates get most of the attention
      • Individual, Capital Gains, Kiddie
    • Credits – dollar for dollar, but offset to taxable income depends on your marginal rate
    • Adjustments to income – to arrive at AGI
    • Exemptions – blind and elderly
    • Itemized deductions
      • Medical subject to 7.5% of AGI
      • SALT (state and local taxes)
      • Mortgage interest (new limits)
      • Charitable contributions (up to 60%)

    Changes to Adjustments to Income:

    • Moving expenses - no longer deductible
    • Alimony paid - no longer deductible (for divorce instruments dated after 2018)
    • Domestic production activities deduction - no longer deductible

    Business Overview:

    • Permanent until modified
    • Corporate flat tax rate 21%
    • MT – repealed for businesses, modified for individuals
    • New credit for employer-paid family and medical leave
    • Entertainment expense – no deduction (anti NFL provision?)
      • Still 50% for meals
    • Bonus depreciation – increased to 100% through 2022, then 80% (2023-2024), 60% (2025), 40% (2026), and 20% (2027)
      • Not to be confused with Sec 179 deduction ($1M generally, $25,000 for SUV)
    • “Luxury” auto limits based on $50,000, up from $15,800
    • Like-kind exchanges – repealed for personal property
    • DPAD – repealed
    • No deduction for amounts paid for sexual harassment subject to nondisclosure agreement
    • Limitation on interest expense deduction (30% if income)
    • Repatriation of earnings and profits of CFCs

    Individual Tax Planning Opportunities:

    • 2017 – accelerate adjustments to income
      • HSA
      • IRA
      • SEP
    • 2018
      • Update chart of accounts for M&E separation
      • Consider doubling up on itemized deductions
      • Deduction for pass-through income

    S-Corporation Planning:

    • Due to the new lower C-Corporation tax rates (21%) should I change my business back to a C-Corporation?
      • That depends:
    • There is still a double-tax regime in place for C-Corporation income.

                                          New  Old

          Regular Tax Rate    21%  35%

          Dividend Tax Rate  20%  20%

          Total Tax Rate        41%  55%

    Highest Individual Rate  37%

    Partnership Planning:

    • Technical Terminations repealed.
    • Mandatory Basis Adjustment on transfers of partnership interests if there is a loss of greater than $250,000.

    NEW Pass-Through Business Deduction:

    • Domestic Production Activities Deduction is repealed.
    • New 20% Qualified Business Deduction (“QBI”) or (the pass-thru deduction)
      • Non C-Corp qualified businesses
      • 20% of taxpayer’s taxable income in excess of net capital gain income.
      • Includes single-member LLC’s and sole proprietors.
    • For all businesses except:
      • Healthcare Professionals
      • Law
      • Accounting
      • Actuarial Sciences
      • Performing Artists
      • Consulting
      • Athletics
      • Financial Services
      • Brokerage Services
    • For higher incomes:
      • The deduction phases out:
    • Taxable Incomes greater than
    • $157,500 for single taxpayers
    • $315,000 for joint taxpayers
    • Those above the thresholds are limited to the deduction based upon W-2 wages plus the basis of acquired property.
    Qualified Business INCLUDES rental activity.
    • In its simplest terms:
      • The deduction is limited to the LESSER of
    • 20% of qualified business income, or
    • 50% of the total W-2 wages paid by the business

    WATCH FOR A TECHNICAL CORRECTIONS ACT TO AMEND THE 20% PASS THROUGH BUSINESS DEDUCTION. WE FULLY EXPECT TO SEE ONE BEFORE THE 2018 TAX YEAR FILING SEASON.

    Other Changes that will have an Impact on Businesses:

    • Net Operating Loss (“NOL”) limited to 80% of taxable income.
    • NOL’s can no longer be carried back
    • Unlimited carryforward
    • Section 179 deduction expanded to include Qualified Real Property, such as HVAC, Plumbing, Fire protection, security, etc.
    • Section 179 limit on SUV = $25,000
    • Bonus Depreciation is for new and used (previously only for new).
    • ADS Depreciation life on Residential Rental Property is 30 years.
    • R&D Expenses now called Research and Experimental Expenses are now capitalized and amortized over a 5 year period.

    As you might imagine, our discussion went long and participant Q&A went even longer. We loved every minute of it. Have questions about how the new tax laws will affect you? We know the answers and WE ARE YOUR ACCOUNTING and TAX STRATEGY ADVOCATES!

    Russ & Russ


    Russ Anderson | 01/12/2018