Tax regulations seem to change quite frequently, making it a challenge for business owners to keep up with it all. A recent bundle of tax benefits signed into law by President Donald Trump, known as the Tax Cuts and Jobs Acts (TCJA), has left companies with new opportunities to save, but the exact perks and specifics can be confusing.
When do the benefits go into effect? How will it change your tax bill? Which businesses qualify? Here’s a quick recap of the latest round of tax breaks and what you can expect when filing.
As with most laws, there are pages of fine print and tax code included in the TCJA rules, but the benefits can be summed up in a few major changes. The advantages that small businesses can enjoy from the legislation, starting with this spring’s tax filing, include:
While there are many tax benefits, they come at the expense of some commonly enjoyed deductions. Certain standard business deductions are cut in half or eliminated completely under the new law. Changes include:
One of the most buzzworthy changes to the tax law is the 20% pass-through deduction for small businesses and sole proprietors that aren’t a C corporation. Given that the change has the potential to significantly cut the amount owed with this year’s filing, it’s important to know if you qualify. The law put the following rules in place:
Some businesses may find that adjusting their tax structure is the best way to take advantage of the new rules, such as converting their sole proprietorship into a C corporation. Seeing as the tax changes are nuanced, however, it’s best to check with your financial professional before spending any of next year’s projected tax savings or making significant structural or budgetary alterations. Every business is unique, and there is no one-size-fits-all advice, so make sure to do your due diligence for 2019.
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