As the 2019 tax season gets underway, tax professionals are working with a complex set of changes to the tax code as a result of the The Tax Cuts and Jobs Act. Amidst the many uncertainties of the new regulations, specific changes afford small business owners some important planning opportunities.
From a significantly lower corporate tax rate to more generous capital expensing provisions, the act brings a host of benefits. Here are five important discussions you should have with your CPA or tax professional.
Here are five of the changes found in the new tax law that may benefit small business owners:
- Lowers the corporate income tax rate permanently to 21 percent, starting in 2018.
- Establishes a 20 percent deduction of qualified business income from certain pass-through businesses.
- Implements a territorial tax system that taxes businesses only on income earned within the U.S.
- Allows small businesses (less than $25 million in average gross receipts) to use the cash method of accounting. The taxpayer may need to file a Form 3115 for a change of accounting method.
- There are higher expensing limits for capital purchases under Code Sec. 179 and bonus depreciation (currently 100 percent). Be careful, however – higher expensing is likely to reduce the 20 percent deduction for owners of pass-through businesses.
Source: Tax Foundation
Almost all these and the many other changes in the new tax law are complicated and may affect companies differently. Small business owners should consult their tax professional to understand the impact and scope of these changes before making decisions about future investment opportunities.
Charles P Myrick CPA, specializes in accounting and business advisory services for new business start ups and entrepreneurs. If you are a small business owner, give us a call. We invite you to learn more about the small business accounting services that are available: (202) 789-8898.