SIDNEY — “The Tax Cuts and Jobs Act of 2017 was signed into law on Dec. 22, 2017. Many businesses and individuals were unsure about how they would be affected. During 2018, we spent a significant amount of time working with our clients explaining the impact of the new law,” according to John Boeckman, president and managing partner of Monnier & Co., CPA’s.
His report continues:
For many businesses, the new law comes down to choosing the right form of entity. The change in the C-corporation tax rate to a flat 21 percent, and the new 20 percent deduction available to owners of “pass-through” businesses, make it essential to analyze the details of the new law to see how it impacts your business. Many specialized service businesses are not afforded the benefits of the new law so decisions have to be made on whether or not to continue in their current form. Real estate companies also face challenges to determine whether or not they qualify for the new deduction. We are here to help answer these questions.
For the most part, the new tax law is taxpayer friendly for businesses. A higher “code section 179” limit ($1 million) along with 100 percent bonus depreciation allows most businesses to write off all new and used equipment purchases. This is a powerful tax benefit which can result in increased cash flows because of the immediate expensing that is permitted.
For individuals, the impact of the new law will depend on lost tax deductions. The cap on allowable state and local tax deductions, and the elimination of some itemized deductions, will cause many to actually see a tax increase. A reduction in tax rates, as well as expanded tax credits, may alleviate some of this burden. One note of caution though. In 2018, the IRS issued revised tax tables to adjust withholding amounts for the reduced rates. Some taxpayers may be in for an unpleasant surprise if they were not careful in considering all of the tax law changes before allowing their withholding to be reduced.
Another major change affecting individuals is the doubling of the standard deduction to $12,000 for individuals and $24,000 for couples. Most taxpayers may now not have enough deductions to even itemize. For some, that will mean charitable contributions they were used to deducting in prior years will no longer provide any tax benefit at all. To avoid this result, a technique called “bunching” deductions has become more popular. This concept allows taxpayers to “bunch” their charitable contributions into alternate years allowing them to itemize deductions one year and take the standard deduction the next. That way charitable contributions can still provide some tax benefit.
Monnier & Co. is pleased to announce the promotion of Corey Kremer to partner. Corey has been an outstanding member of our firm since he started in 2009 and we wish him continued success in his accounting career. We would also like to congratulate Ryan Smith for successfully passing his CPA exam. Ryan joined the firm in May 2017 after graduating from Miami University.
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, business succession planning, financial reporting services, business valuations, and technology consulting. The staff at Monnier & Co. is dedicated to providing quality service. We invite you to consult with any of our 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.