Tax Reform – Time to Plan for 2018
The tax reform bill is going to go to the President for his signature. It will take effect for 2018. What impact will the new legislation have on you? We at Joseph F. Fragnoli, CPA, PC in Nashville, TN would love to discuss this with you.
If you own a business that is not a professional business (CPA (darn), attorney, doctor, dentist, engineer) you will get a deduction of 20% of the profit from the business. So, for the professional companies, there is some serious planning to do to structure new businesses and generate non-professional income to take advantage of the new law. Once the law is signed and the final version is released, I will be able to provide some specifics on these strategies. The point is that business owner’s will need to set-up a tax plan in early 2018 to reap the maximum benefits of the tax change.
One important change for businesses, and the need to change their accounting process at the beginning of 2018, is the loss of the entertainment expense deduction. Fifty percent of business meals will still be deductible; but, certain entertainment expenses will no longer be deductible. So, it is critical that business change their accounting processes to break out the meals specifically from other entertainment.
Individual wage earner’s will also be impacted. One impact will be the doubling of the standard deduction. For married couples the standard deduction is proposed to be increased to $24,000. Also, while we lose the exemption deduction, the child tax credit is increased from $1,000 to $2,000, some of which is refundable. Also, for employees who incur business expenses, they are no longer deductible under this coming legislation. Basically, we lose all itemized deductions other than mortgage interest (subject to a cap on the loan of $750,000), charitable contributions and medical expenses subject to adjusted gross income limitations and state and local income taxes subject to a limit of $10,000.. As it pertains to mortgage interest, home equity lines of credit interest is no longer deductible. The Affordable Care Act (Obama Care) individual mandate is eliminated beginning 2018. This impacts your taxes and your personal planning.
The above are just some highlights of the law changes. There is a lot to absorb in the new legislation. A great summary of the pending law can be viewed at http://www.cpapracticeadvisor.com/news/12387553/2018-tax-reform-bill-passes-house-heads-to-senate. This article has a lot of detail and is an excellent review.