Keith Boyer CPA's Blog

Topics and tips about accounting, taxes, business to personal finance and more!

Is the new tax plan beneficial for businesses?

We are optimistic the changes forthcoming to the tax code will be positive for the business owner. Much talk in the press and even in accountants forums, is that the advantage for "flow throughs" (funny, every time I write "flow-throughs" spell check comes up), is limited by thresholds of $315,000, married filing jointly, and $157,500 for other filers, We believe, and I think the Wall Street Journal confirms this morning, that those limitations apply only to Selected Services Businesses, (SSBs) Specified Service Business defined as a trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees. (Architects do not fall into this description). Therefore most "flow-throughs will get the benefit of a 20% reduction in taxable income resulting in a reduced rate of 29.6% (assuming the taxpayer is in the maximum tax bracket) on that income....
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Topics not discussed in the weekend's papers included in the conference agreement

 The repeal of the Individual Mandate (requirement to purchase medical insurance) is effective for months beginning after December 31, 2018.  Therefore insurance will be required for 2018 without having to pay the penalty. The bill also retains the medical expense deduction, which allows taxpayers to deduct medical expenses that exceed 10% of their income.  The overhaul would for one year lower the threshold to 7.5%, where it used to be, and return it to 10% in 2019. How will it effect my business deductions? 1.  Luxury automobiles (and all auto's for that matter)     Annual Depreciation- up significantly.                                      Current                    Proposed Year 1-              $3,160                         $10,000 Year...
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Tax Reform: The latest brewing at Capitol Hill

 Under the deal worked out by committee member of the House and Senate Top individual tax rate = 37%, Current top tax rate = 39.6% Deduction for SALT (state and local taxes) capped at $10,000 Alternative Minimum Tax on individuals would remain but the exemption would be increased to $500,000 for individual filers and $1,000,000 for those filing joint returns which would effectively eliminate the AMT for many filers. Top corporate rate would be 21% Negotiations are still under way for the “deduction” for pass-throughs. According to the WSJ a deduction of 20% is being discussed which equates to a rate of 29.6%. There has been some speculation regarding the child tax credit and increasing it to as high as $2,000.  As of now, it stands at $1,100.  Republican Senator Marco Rubio threatened to vote against the bill unless the "child tax credit is made more generous to help lower-income workers...
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A key limitation under Trump's new tax plan

A fundamental tax planning strategy is to accelerate deductible expenses into the current year. This typically will defer (and in some cases permanently reduce) your taxes. But there are exceptions. One is if the additional deductions this year trigger the alternative minimum tax (AMT).  Complicating matters for 2017 is the fact that tax legislation might be signed into law between now and year end that could affect year-end tax planning. For example, as released by the Ways and Means Committee of the U.S. House of Representatives on November 2, the Tax Cuts and Jobs Act would repeal the AMT for 2018 and beyond. But the bill would also limit the benefit of some deductions and eliminate others.

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