This what you need to know about the new tax law if you are a business owner.
Are you a big corporation (i.e. Google, Apple, Exxon, etc)? If yes, then your tax rate is being cut to 21% from 35%.
Specified Trade - The new law is bringing a new term for business owners "specified trade" You are in a specified trade if you are a doctor, lawyer, CPA, actuary, consultant, performing artist, athlete, financial advisor, bankers, etc.
Are you a small business owner, but not in a specified trade? (Real estate agents, store owners, tech, police security firms, advertising, media companies, wholesalers, photographer, construction, and many other businesses) Good news! Much of the tax code remains the same, but now the IRS is giving you an extra 20% deduction off your income or a deduction based on wages taken from the company. Also, some other rules are being loosened up such as bonus depreciation.
Are you a small business owner and in a specified trade? The changes will be positive overall but may not be as good as other business owners not in the special trades. The extra 20% deduction is only available in full to taxpayers who make under $157,500 if single and $315,000 if married and goes away at $207,500 and $415,000.
Do you own rental properties or commercial buildings? As of January 2018, the new code has not fully developed in this area. However, we believe that either the 20% deduction off taxable income or a 2.5% deduction based on assets will be available.
Overall business owners will benefit from the new tax law.
A lot of these new provisions will be tricky to navigate to get the max benefit. For example, a business structured as an LLC might get preferential treatment vs. a sole proprietor without one.
Give us a call/text at 682-225-4637 or email us at JR@JRGTaxes.com today if you have any questions. Appointments are also available at calendly.com/jrgtaxes. We help hundreds of businesses a year find the right tax structure for them to optimize their situation.
JR Gramstad CPA