Now is the time to evaluate and plan for your 2018 taxes. I think about it as being proactive versus reactive. Early planning allows business owners to implement year end moves to reduce taxes. Once the year has ended, there are limited moves that can be made to reduce an unexpected tax burden. There were many changes included in the Tax Cuts and Jobs Act (TCJA) effective in 2018 that may benefit you.
First, if your accounting records are not up to date, NOW is the time to do that. You can’t plan if you don’t know where you are. Having accurate and prompt financial information is the key to managing the financial aspects of your business, including appropriate year end planning. Your tax pro will be able to provide the best advice if they have a good picture of where you expect your financial results to be for the year.
Thanks to the TCJA, 100% first-year bonus depreciation and increased Section 179 deductions up to $1 million is available for certain qualified new and used property that is acquired and placed in service in calendar year 2018. This means your business might be able to write off the entire cost of some or all of your 2018 asset additions on this year’s returns. Consult your tax pro for details on how best to get these tax breaks and what types of assets qualify. And, remember that the acquisitions must be purchased and placed in service prior to the end of the year. So if there is a piece of equipment or asset you will be purchasing, allow sufficient time to order, pay for, receive and place in service to get the deduction.
There is also a new deduction based on qualified business income from pass-through entities. The deduction can be up to 20% of a pass-through entity owner’s QBI, subject to restrictions that can apply at higher income levels and another restriction based on the owner’s taxable income. The new QBI deduction regulations are lengthy and complex. Contact your tax pro to help you get the best QBI deduction results for your specific circumstances.
With changes to itemized deductions, standard deductions, elimination of personal exemptions, tax rates, and the multitude of specifics included in TCJA, it is important to analyze and plan for your specific situation to maximize the benefits.
Contact us today to discuss how the new tax law impacts you.
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