While we’ve previously discussed the ways the Trump Tax Plan has affected individuals, like how W2 employees can no longer deduct non-reimbursed business expense from their tax return or the ability for 1099 employees to fully deduct expenses against their self-employed revenue, we haven’t yet discussed the ways the new tax laws affect local small businesses.
Whether you’re an established mom and pop shop or a growing tech startup, the Trump Tax Plan made several beneficial changes that small businesses in the Glendale area and beyond can benefit from.
2018 Tax Reform Benefits for Small Business Owners
Here’s a few highlights of some of the new benefits Glendale small businesses will benefit from under the Trump Tax Plan:
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Lower Tax Rate for Corporations
Is your small business set up as a C-Corporation? If so, you’ll find your cost of doing business greatly reduced with the new tax laws. New to 2018, the corporate tax rate was lowered significantly to a fixed 21%. In addition, there is no longer an alternative minimum tax (AMT), which was previously imposed at 20% for businesses who’s grouch receipts were $7.5 Million or more. If you haven’t incorporated your business yet, this might be a good reason to do so!
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Qualified Business Income Deduction
Not a C-Corporation? The tax reform still offers sole proprietors, s-corporations, partnerships, and LLCs a new kind of relief known as the 20% Pass Through. With this new law, 20% of your Net Income from your Qualified Business Income can be deducted, as long as your taxable income is below $157,500 as a single filer or $315,000 as a married filer. Consult with to your tax advisor to determine if you’re eligible.
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100% Bonus Depreciation
In 2002, Congress introduced Bonus Depreciation which allowed you to deduct 30% of the depreciation for personal property used for business expenses in the first year. In 2015, Congress upped this deduction to 50%. With the new tax laws, this number is increased to 100%. This means great potential savings for small businesses, as personal property used for business purposes like cars, computers, machinery, and furniture acquired and placed in service after Sept. 27, 2017 can be completely expensed within the first year of purchase.
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More Businesses Can Use Cash Method Accounting
More businesses are now able to take advantage of the cash method of accounting versus the accrual method, which is a huge benefit to manufacturing businesses and small businesses with inventory. With the cash method, businesses can deduct the cost of inventory when they pay for it versus when that inventory is sold.
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Bonus Credit For Paid Family & Medical Leave
The Trump Tax Plan also brings temporary incentives for providing paid family and medical leave to your employers, in the form of a tax credit ranging from 12.5% to 25%. In order to be eligible, employers must have a written policy in place that provides at least two weeks of paid family and medical leave to qualified full time employees with pay that is greater than 50 of the employees wages. This credit only lasts until 2019, so take advantage of it this year!
How does the Trump Tax Plan Affect Your Small Business?
What do these changes mean for your small business? Are you taking advantage of the new tax laws? Call us today at (818) 242-4888 or schedule your free 30-minute consult now. Robert Hall & Associates is a leading small business tax preparer and consultant serving Glendale, Burbank, Pasadena and the Greater Los Angeles area. Our team of enrolled agents can guide you through the business tax filing process and advise you on locating and gathering the documentation you will need.