Tax Law Changes Affecting Business Owners for Upcoming Filing Season

    Elizabeth M. Esarey, CPA
    Manager of Business Tax and Accounting Department

    While tax simplification may occur for some individual taxpayers as a result of the Tax Cuts and Jobs Act, business owners may be faced with a myriad of choices that need to be considered to maximize the many changes. If you are self-employed or an owner in a small business, this new act that was signed into law in December of 2017 will likely have an impact on your tax liability for 2018. Listed below are some of the key changes that you will want to consider for the upcoming filing season:

    Qualified Business Income Deduction:

    This is a brand-new deduction that may allow eligible businesses to exclude up to 20% of their qualified business income from taxation. Due to the coordination with other deductions and credits, this calculation can become very complicated. Special care should be taken when calculating this new deduction.

    Section 179 Deduction:

    Eligible capital expenditures that could be immediately expensed increased from $500,000 to $1,000,000 with the new act. In addition, the phase out limit increased from $2,000,000 to $2,500,000. The following assets were also added as eligible property:
        • Qualified building improvements to a building’s interior. However, these
           building improvements do not qualify if they are:
              o Due to the enlargement of the building
              o For an elevator or escalator or
              o For the internal structural framework of the building
        • Roofs, HVAC, fire protection systems, alarm and security systems.

    Bonus Depreciation:

    This change increased the write off from 50% to 100% for qualified property acquired. Another change made is that used equipment now qualifies for bonus depreciation. Formerly only new equipment qualified.

    Entertainment and Meals:

    A business can no longer deduct any expenses related to entertainment, amusement or recreation. However, meals are still deductible at 100% if they are provided for a client event or for a social office party event. Meals are limited to 50% deductibility if they are for a client meeting, meals while traveling for business, and meals provided for the convenience of the employer. Tickets to sporting events or concerts, which previously were 50% deductible, are no longer allowed.

    These are just a few of the many changes for the upcoming filing season. Please contact a member of our team to help you navigate and maximize your deductions as a result of the Tax Cuts and Jobs Act.