Guest post by Eva Rosenberg, author of Small Business Taxes Made Easy, 3rd Edition.
Every few decades, our legislature graces us with monumental changes to the United States Internal Revenue Code. The last time they did that was under President Reagan, with the Tax Reform Act of 1986 (TRA86). Thirty-one years later, President Trump’s administration brought us the Tax Cuts and Jobs Act (TCJA).
TRA86 brought so many confusing changes that it took the IRS years to understand how to audit passive losses and carryovers, and alternative minimum taxes. But the IRS had no problem figuring depreciation. This time, the IRS (and tax software companies) will face great challenges trying to understand how to construct the computations for various business provisions.
For the current tax return filing season (tax year 2017), you are barely affected. There are three main things that will affect your 2017 tax return:
- Charitable contributions – must have receipts, even if the organization reports your contributions.
- Medical Expenses – are only reduced by 7.5% of AGI (was 10% of AGI).
- 100% Bonus Depreciation – effective for assets put into service after September 27, 2017
Most other provisions of the TCJA do affect your tax life during 2018. Many of the personal changes will expire in 2025. Some will expire sooner. But most of the business provisions are defined as permanent changes.
Here are some of the many things that might be of benefit to you:
- Alternative minimum tax canceled for corporations
- Flat tax of 21% for corporations
- This good if you’ve been paying 25%
- It’s bad if you’ve been paying 15%
- And it’s great if you are a Personal Service Corporation (PSC) paying 35%
- Depreciation deductions have increased dramatically – there are lots of new provisions and additional assets that may qualify. But here are some of the basics:
- Section 179 depreciation deduction limits have increased to a $1 million, with phase-outs starting at $2.5 million of total asset purchases.
- Bonus depreciation deductions have jumped to 100% of cost – and may now be claimed on used assets as well as new assets.
Known as TaxMama®, Eva Rosenberg’s frankness, sense of humor and casual, chatty delivery makes her a welcome talk show guest and speaker around the country. An Enrolled Agent, licensed by the IRS and the U.S. Treasury Department, Eva is the publisher of TaxMama.com, and the author of Ask TaxMama® on her website. Her TaxQuips podcasts also keep people entertained and informed.