SIDNEY — “The Tax Cuts and Jobs Act of 2017 was signed into law on Dec. 22, 2017. What came with it was many changes affecting both business and individuals” according to John Boeckman, president and managing partner of Monnier & Co., CPA’s. “The law changes affect almost everyone in one way or another and for the most part will be effective for tax years beginning in 2018.”
His report continues:
For businesses, two very important changes include the reduction of the C-corporation tax rate to 21 percent and the new 20 percent deduction available to owners of “pass-through” businesses, namely partnerships, S-corporations, limited liability companies and sole proprietorships. Many businesses will now have to decide which entity form – “C corporation” or “pass-through” will be most beneficial, not only from a tax standpoint, but also operationally. This will be a difficult decision, one that we are here to help with.
Other law changes that will benefit many businesses is the increase in the expense limit for purchases of equipment. The so-called “code section 179 limit was raised from $510,000 to $1 million. This effectively allows most small business to expense all of their equipment purchases. Congress also chose to increase the allowable amount of “bonus depreciation” from 50 percent to 100 percent, permitting larger corporations to expense most all of their purchases of equipment. This includes used equipment, which was not allowed under prior law.
For individuals the focus was on reducing tax rates. Reducing the rates and expanding the corresponding tax bracket that each rate covers, should result in a tax reduction for most individuals. In fact, the IRS has issued revised tax tables to adjust withholding amounts for the reduced rates. Taxpayers should be careful, however, and consider all of the tax law changes, some of which are listed here, before concluding that their taxes will be reduced.
One change affecting individuals includes doubling the standard deduction to $12,000 for individuals and $24,000 for couples. This change effectively eliminates most taxpayers from having to claim itemized deductions. Certain taxpayers might still be able to realize the benefit of itemizing deductions by “bunching” deductions. This concept allows taxpayers to itemize in alternate years when deductions might exceed the standard deduction. At least then, the tax benefit of certain deductions is not lost.
The new law places limits on certain itemized deductions. State and local taxes plus real estate taxes are now limited to $10,000. Mortgage interest is limited to interest on $750,000 of acquisition indebtedness instead of $1 million. Miscellaneous itemized deductions have been eliminated so the fees that are paid on investment accounts as well as deductions incurred by employees will be lost. Careful planning will be necessary for many taxpayers who are seeking ways to make up for these lost tax deductions.
Monnier & Co. welcomed one new employee to the firm in 2017. Ryan Smith joined the firm in May of 2017. He worked as an intern for the firm in 2016 before joining us as a full-time staff accountant this past year. Ryan recently graduated from Miami University with a Bachelor’s degree in accounting.
A full-service accounting firm, Monnier & Co. offers traditional audit, accounting and tax services as well as estate planning, merger and acquisition planning, business and individual tax consulting, financial reporting services and business valuations. Quality has always received priority at Monnier & Co. We invite you to consult with any of the Monnier & Co. professionals regarding these or any other accounting or tax issues. Feel free to call us at 937-492-6101 or visit our website at monniercpa.com.
