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Tax Reform Impact to Small Businesses

02.07.2018

The recently passed tax reform bill, commonly referred to as the “Tax Cuts and Jobs Act” (TCJA), is the most expansive federal tax legislation since 1986. It includes a multitude of provisions that could have a major impact on small businesses in particular. Karen Stern, Partner in Charge, Entrepreneurial Services Group, covers some of the most significant changes slated to impact small businesses in this month’s “Financial Fitness” column, as featured in Small Business Monthly:

  • Replacement of graduated corporate tax rates ranging from 15 percent to 35 percent with a flat corporate rate of 21 percent
  • New 20 percent qualified business income deduction for owners of pass-through entities (including partnerships, limited liability companies and S corporations) and sole proprietorships – through 2025
  • Doubling of bonus depreciation to allow for a 100 percent deduction and an expansion of qualified assets to include used assets – effective for assets acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023
  • Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million
  • New disallowance of deduction for net interest expense in excess of 30 percent of the business’s adjusted taxable income; taxpayers (other than tax shelters) with average annual gross receipts of $25 million or less for the three previous tax years are exempt from the interest deduction limitation
  • Elimination of the Section 199 deduction for all taxpayers, also commonly referred to as the domestic production activities deduction or manufacturers’ deduction, effective for tax years beginning after Dec. 31, 2017
  • New limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation; most significantly, the deduction for business-related entertainment expenses is completely disallowed

Each of these provisions generally apply to tax years beginning after Dec. 31, 2017, unless noted otherwise above. Additional rules and limits may apply, and there are other provisions under the TCJA that may affect your business. For more information on how tax reform might impact your small business, please fill out the adjacent form to schedule a meeting. 

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