On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act of 2017 (TJCA). The 503-page TCJA is the largest tax overhaul since the 1986 Tax Reform Act and it will affect almost every individual and business in the United States. Unlike the provisions for individuals, which generally expire after 2025, the business-related provisions in the TCJA are permanent and generally take effect in tax years beginning after 2017.
For businesses, highlights of the TCJA include: (1) an increase in amounts that may be expensed under bonus depreciation and Section 179; (2) a 21 percent flat corporate tax rate; (3) a new business deduction for sole proprietorships and pass-through entities; and (4) the elimination of the corporate alternative minimum tax (AMT).
Overview of TCJA Changes Affecting Businesses
1. Reduction in Corporate Tax Rate and Dividends Received Deduction
2. Corporate Alternative Minimum Tax (AMT) Eliminated
3. Enhanced Bonus Depreciation Deduction
4. Enhanced Section 179 Expensing
5. Modifications to Depreciation Limitations on Luxury Automobiles and Personal Use Property
6. Modification of Like-Kind Exchange Rules
7. Other Changes Relating to Cost Recovery and Property Transactions
8. Repeal of Domestic Activities Production Deduction
TCJA repeals the deduction for domestic production activities.
9. Repeal of Domestic Activities Production Deduction
TCJA repeals the deduction for domestic production activities.
10. Repeal of Domestic Activities Production Deduction
TCJA repeals the deduction for domestic production activities.
11. New Deduction for Qualified Business Income
12. Carryover of Business Losses
13. Relaxed Gross Receipts Test for Various Accounting Methods
14. Accounting Method Rules Relating to Income Recognition Modified
15. Interest Deduction Rules Changed for Certain Taxpayers
16. Limitation on Deduction by Employers of Expenses for Fringe Benefits
17. Employer Credit for Paid Family and Medical Leave
20. International Tax Changes
TCJA makes sweeping changes to the Unites States' international tax regime through a series of highly complex provisions that are beyond the scope of this letter.
Concluding Thoughts
As you can see, the provisions in the TCJA are quite extensive and also quite complicated.
Please call our office at your convenience so we can discuss how these changes will impact your business, and what kind of strategies we can adopt to ensure that your business gets the best possible tax outcome under the new rules.
