New Tax Law Changes - Businesses
A short recap of the new tax law changes that most commonly affect many businesses (for 2018) follows:
1) C Corporations are now taxed at a flat rate of 21%. No more brackets based on taxable income.
2) Corporate Alternative Minimum Tax (AMT) is now history.
3) New 20% deduction of qualified business income for pass-through businesses (this calculation is complex and far-reaching).
4) Excess business losses are limited (aside from a corporation).
5) Cash basis method of accounting has been extended to taxpayers with less than $25 million in average gross receipts. A change in accounting for inventory has also occurred.
6) Completed contract method of accounting has been extended to businesses under $25 million in gross receipts.
7) Like-kind exchanges are no longer allowed for any transactions aside from real property. Ouch!!!
8) Deductions for entertainment are gone.
9) Depreciation amounts for luxury vehicles have increased.
10) Businesses with sales in excess of $25 million will now have limited interest expense deductions. Excess may be carried forward.
11) Section 179 expensing up from $510,000 to $1,000,000; but, phase out begins at $2,500,000.
12) Definition of Section 179 property has been expanded. That is a good thing.
13) Section 168 bonus property no longer has to be new property. The 50% has been increased to 100% on property placed in service after 9/27/17.
14) Net operating losses (NOLs) can no longer be carried back (other than two years allowed for farming operations). They may now be carried forward indefinitely and are subject to an 80% income limitation.
15) Domestic Production Activity Deduction (DPAD) is no longer allowed. Many businesses will be adversely affected by the loss of this provision.
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