Remember the states have varying degrees of conformity to these items so continue keeping your receipts for everything to discuss with your tax preparer at tax time.
In addition to the 21% tax rate for corporations and the 20% deduction on Qualified Business Income, there were several changes to the Individual tax code that will affect most everyone – here are the major ones
- Alimony – for divorces closed after December 31, 2018 alimony will no longer be deductible to the payor and no longer included as income to the payee
- Meals & Entertainment – there are so many specifics here to be aware of I will probably do a separate email on it but in general, all entertainment for clients and prospects is not deductible for federal purposes. Entertainment and team building or meals for employees, Chamber of Commerce or Business League meals and travel meals are still deductible at 50%.
- Charity Golf Tournaments, Sporting Events, etc for prospects or clients are no longer deductible as business expenses, but they may have a portion deductible as charitable contributions if supported by a 501c3 and substantiated by the organization.
- Employee Business expenses and Investment Expenses previously subject to the 2% or AGI floor is no longer deductible on your Federal return.
- Mortgage interest is only deductible on the first $750K of a personal home for mortgages taken out after 12/14/17.
- If you are an employer with under 50 employees you are able to create a Qualified Small Business Health Rembursement Agreement if you want to help your employees pay for health insurance and costs. If you just reimburse your employees, believe it or not, you can be fined so please let me know if we need to get this together for you.
- NOLs created in 2018 forward will no longer be able to be carried back to recover prior years taxes. It can, however, be carried forward indefinitely. New rules will only allow those NOLS carried forward from 2018 forward to shelter 80% of your income.
- State and Local Taxes deduction has been limited to the first $10,000 of taxes paid
- The Standard Deduction for Singles is $12,000, Head of Household is $18,000 and Married Joint is $24,000
- There is no Personal Exemptions, but there will be a dependent tax credit – a direct reduction to taxes
- New lower tax brackets
Now is the time to review your tax situation for the year and do some planning – are you paying in too much? Are you paying too little? What can you do to change that trajectory? If you want to review your situation you should contact your preparer, Or contact us.
We’ll chat again soon.