Jason Bovell, CPA is our featured guest author this month. You can see the original post on his website here.
In the beginning of 2018, new tax reforms prompted changes to many business operations. The details of how it impacts individuals as well as business owners has some surprising benefits and drawbacks, depending on your household income and what type of business you may own. The benefits of the tax reform intended to help middle-income families and small business owners in hopes of decreasing the financial hardships these two groups previously faced.
Tax Changes for Individuals
The largest change for individual tax payers is the changes made to tax brackets. Overall, tax rates are lowered while keeping the seven-income tax bracket structure. Standard deductions are doubled. These changes revert back to the 2017 amounts in the year 2026. Other changes made include eliminating most itemized deductions, though IRA contributions are now deductible and deductions for charitable contributions and student loan interest remain. Another widely debated change was the new requirement that unemployment income is fully taxable.
Tax Changes for Businesses
The biggest change for businesses impacts small business owners and high-income sole proprietorships. Pass-through businesses now face a tax rate of 21%. Previously, no specific business types were excluded from passing through expenses and revenues, though the recent changes include exclusions for accountants, consultants, lawyers, and other solo-venture professional services. Essentially, individuals who are high-earners and previously had the ability to write off much of their expenses will no longer be allowed to do so, as they do not face the same burdens that many small businesses have, such as employee salaries and insurance costs.
If your business makes large equipment purchases, there’s good news for you. While previous business expense write-offs for equipment allowed small business owners to deduct up to $510,000, new regulation allows businesses to deduct nearly twice that at increasing the amount to $1 million.
The 2018 tax reform has made a lot of nuanced changes to previous tax laws and many individuals and businesses are wanting extra oversight of their financials to ensure compliance. If you’re seeking professional tax oversight or personal assistance regarding tax preparation, planning, or resolution, our company is here to help. Contact our team to learn more about how we can help ensure you’re making the most of recent tax reform.
To contact Jason you can see his contact information on his website here, or at the contact information below.
Phone: (212) 332-1660
Fax: (866) 882-1842