If you own your own business, or have a significant role in a larger company, you know that any time the word “reform” is thrown around, it can cause a confusion and frustration for just about everyone involved in your organization. It affects individuals, benefits packages, accounting, and management decisions. Knowing how to make sense of it all matters for you and the people you work with. The overhaul of the American tax system that was recently passed has ushered in significant changes, both for individuals and businesses. We’ve also seen a large measure of confusion about the implications of the law, such as lining up to pay property taxes early. Rather than wading through misinformation across biased media sources, we want to help clear up a few of the most talked about sections. We believe strongly in the value of tax planning though, so it is certainly in your best interest to meet with one of our accountants to discuss a specific plan for your business and your family. Here are five things we’d like you to know about the new tax landscape.
1. Everyone’s Tax Bracket Changed
The biggest and most impactful changes has to do with the way income brackets are being taxed now. Individuals, couples filing jointly, and businesses all have different tax rates. For almost everyone, these rates are decreased. Simplifying the tax brackets and reducing the rates means more money for your employees, for your business, and a simpler filing process during tax season. Keep in mind though that these overall rate increases meant that many loopholes and deductions were eliminated, so it’s important create a new roadmap for your business.
2. Not Everything Got Better
As with any law, you have to take the good with the bad. Personal exemptions are almost completely gone. Itemized deductions took a huge hit (including mortgage interest). State and local tax write offs are limited to $10k. Entertainment write offs were eliminated, except for meals and holiday parties. And the deduction for dividends received was reduced. From capital gains limits to re-categorizing Roth IRA contributions, there are some areas that changed significantly and will affect the financial choices you and your employees make.
3. Families Got More Benefits
The new tax law can work in favor of almost every company, even with some of the eliminations and changes, provided you have a plan. The standard deduction increased for both married couples filing jointly and individuals. The child tax credit doubled. There’s no longer a penalty for not having health insurance. Medical deductions increased. Passing these along to your employees helps them plan for their families and can keep your employee morale high. However, this can only happen if you properly communicate this to your team. A meeting with your accountant can help you understand these implications to your employees and properly communicate them throughout the business.
4. It’s a Lot Better For Your Business
It’s hard to ignore a flat tax rate of 21% for your business (down from 35). Property depreciation increased and the alternative minimum tax was repealed for all Class C Corporations. There are a few changes that will affect some of your business, such as the like-kind exchanges being limited to real property, and the repeal of the domestic production activities deduction. Overall, these changes help your business and your personal income. Again though, these changes are only as good as their ability to be planned for, so make sure that you start 2018 accordingly.
5. Our Accountants Are Ready to Help You Navigate the New Law
This isn’t the first time the tax laws have changed, and it won’t be last. Our team has been diligent in learning the implications of these changes and made the conscious decision to take the time to understand what it means for each of our clients. We’re ready to answer your questions and help design a plan in this new landscape to keep your business growing and thriving. Whether you want to know the effect it has on your business or you personally, we’re ready to help.