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Business Tax Rules Changes

Small and Medium Businesses, especially, need to know about changes in Tax rules from the Tax Cuts and Jobs Act (TCJA). 

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  1. New flat 21% tax rate for corporations.  The rates before TCJA was enacted were 15%, 25%, 34% and 35%.  Personal Service Corporations paid a flat 35% rate.  Beginning in 2018, Corporations pay a flat 21% tax rate.  That rate applies to Personal Service Corporations too.  This change means the tax cost of doing business as a profitable C corp is reduced as of 2018.
  • No more corporate alternative minimum tax.  Previously, the Corporate alternative minimum tax for corporations with annual gross receipts at $7.5 million or more was 20%.    Good news for those struggling to calculate the tax, it was repealed by the TCJA.
  • First year depreciation of 100%.  Qualifying assets placed in service between September 28, 2017 and December 31, 2022 businesses may deduct 100% of the cost in Year 1.  That 100 percent instant write-off is allowed for both new and used qualifying assets. This change is a major tax saving benefit for many businesses, beginning on the 2018 return and forward.
  • Cap on first year depreciation deductions now $1 million (was $510,000 in 2017) Section 179 first year depreciation deduction is not only raised 196% but the TCJA also expanded the definition of qualifying assets to include depreciable tangible personal property used mainly in the furnishing of lodging.  So, yay!  Talk to your tax professional for more information on this and more TCJA changes.  Need a tax professional?  Come see us at BusinessTaxPrep.com and be connected to the professional with answers for you and your business.
  • Depreciation deductions for passenger vehicle used for business.  If your new or used passenger vehicle was placed in service in 2019 and used over 50% for business, the maximum depreciation deductions allowed under the TCJA are
    • $16000 for 2019
    • $9600 for 2020
    • $5,760 for 2021 and forward until vehicle is fully depreciated. 
    • The limits are slightly higher on light trucks and vans.

More Next week in BusinessTaxPrep.com Tuesday Tax Tips.