Year-end planning is a bigger challenge this year than in past years. As you may have heard, the ‘Tax Cuts & Jobs Act’ is tax reform legislation that has recently been proposed, but will likely not be enacted until the 2018 tax year if approved. As the proposal is likely to go through many changes before it becomes law, we will be providing you with a detailed summary of changes that may affect your business as the proposal goes through the process. The proposal is highlighted by changes in business tax rates for 2018 and beyond including the following:
- Certain pass-through business entities would be taxed at a flat 25% rate on a portion of their income;
- Corporations would be taxed at a flat 20% rate and personal service corporations would be subject to a flat 25% corporate tax rate; and
- Bonus depreciation of 100% would be allowed on the purchases of new and used capital asset purchases, and Section 179 expensing would be greatly expanded.
As the ‘Tax Cuts & Jobs Act’ has not yet been approved, the current proposal is not a reliable means with which to plan for the 2018 tax year. This has created a great amount of uncertainty with regards to what your businesses tax liability may look like in 2018, further complicating last-minute moves that you may want to consider as year-end approaches for the 2017 tax year.
Below we have compiled a list of items that may be helpful if taken into account before the end of 2017, which may help save or defer taxes. Due to the uncertainty surrounding tax reform, we ask that you please review the following list and contact us to discuss the benefit and/or your eligibility before taking any action.
- Note bonus compensation deductions for accrual method firms may be limited.
- Set up a self-employed retirement plan.
- Increase your basis in a partnership or S corporation if doing so will enable you to deduct a loss from it for this year.
- Businesses should consider making capital expenditures that qualify for the IRC Section 179 first year business expensing option.
- Consider making capital expenditures that qualify for 50% bonus first year depreciation if bought and placed in service this year.
- Make qualified research expenses before the end of 2017 that are eligible for the research credit.
- Review your capital expenditures to identify those that qualify to be expensed under the IRS safe harbor de minimis threshold of $2,500 (or $5,000 if you have an applicable financial statement).
- Qualified small employers that do not offer a group health insurance plan should consider a “Qualified Small Employer Health Reimbursement Arrangement” (QSEHRA).
- Owners of closely-held businesses should be on the watch for reasonable compensation and constructive distributions.
Please visit our website for a summary of the above noted items. You should examine these as well as other tax planning options thoroughly before initiating action. We are happy to discuss these with you and tailor a tax plan that will work best for you.
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