May 2018

Page A22 MAY 2018 FUNERAL HOME & CEMETERY NEWS S ec t i on A Shannon Combs (right) of Combs, Parsons & Collins Funeral Home of Richmond, KY is pictured accepting delivery of their funeral coach from John Muster of Muster Coaches. 1-800-274-3619 Muster Coaches Calhoun, KY Combs, Parsons & Collins Funeral Home Tax Cuts and Jobs Act of 2017: What’s in it for you in 2018? By Christine Blankenship, CPA, CTC Christine Blankenship Although you’re breathing a sigh of relief now that 2017 is in our rear-view mirror, get ready for 2018. On December 22, 2017, the president signed the Tax Cuts and Jobs Act of 2017, the most sweeping change to the tax code in 31 years. This creates nu- merous tax saving opportunities for businesses. What effect might the new law have on the amount you pay in taxes? The Act focuses most of its effort on corporate tax- es, with a new flat rate of just 21 percent and vari- ous provisions designed to make American businesses more competitive global- ly. The law also moves in the direction of true “tax reform,” in which in- volves some deductions which are eliminated in exchange for lower rates. However, the new law gets us nowhere near the dream of filing taxes on a postcard. In fact, due to the dra- matic changes in the tax law, it is more critical than ever to put in place year-round tax planning. Navigating through the rough waters of the 70,000 pages of the tax code is tricky. To reach your business goals and increase your cash flow, now is the best time to assess and determine a course of action to take advantage of the tax changes and implement advanced tax reduction strategies. Taxes aren’t Black and White What does the new tax reform mean for millions of small business owners? How does it affect your tax planning for 2018? The key areas change with the new tax bill. For example, savings could be in the mil- lions of dollars overnight, depending on your current tax situation. They may also increase slightly. The key is to familiarize yourself with the rules and partner with a seasoned tax planner to ensure you take advantage of every available tax break. New “C” Corporation Tax Rates Corporations are big winners in the new law. The “C” corporation’s tax rate will be a flat 21 percent beginning in 2018. In the past, the tax rate would range from 15 percent to 35 percent, based on taxable income. So, this is the time to re- evaluate the structure of your company. Are you structured correctly to take advantage of the tax benefits you are entitled to? If you’re paying more than 20 percent tax, now might be the best time to determine if switching to a “C” corporation, or a dual corporation strat- egy, may automatically lower your tax. Section 199A Qualified Business Income Deduction This is a brand new tax deduction for owners of pass-through entities. So if you are an owner or a part owner of a Limit- ed Liability Corporation (LLC), partnership, sole proprietorship, or “S” corporation, pay atten- tion! This entity struc- ture currently pays no income taxes itself; instead the income from the busi- ness passes through to the owners. However, under this reform, the entity may qualify for a 20 percent deduction of qualified net business income. Yet there are two obstacles for claiming the 20 per- cent deduction: 1. Specified service trade or business (doctors, law- yers, accountants, artists, actors, athletes, traders, essentially occupations which provide a personal service, with some exceptions). o If taxable income is less than the threshold lim- its of - $157,500 (single) or $315,000 (married filing jointly) – 20 percent deduction is fully available. o If taxable income exceeds the threshold limits of - $157,500 (single) $315,000 (married filing jointly) – deduction is reduced pro-rata. o Unfortunately, the deduction will be completely phased out if taxable income exceeds $207,500 (single) / $415,000 (married filing jointly). Once these limits are reached, there is no de- duction. (But don’t worry, there are many strat- egies available to help you achieve substantial tax savings.) 2. All other businesses o If taxable income is less than the threshold lim- its of - $157,500 (single) or $315,000 (married filing jointly) – 20 percent deduction is fully available. o If taxable income exceeds the threshold lim- its of – $157,500/$315,000, but less than $207,500/$415,000, then a prorated deduction is available after considering the wage and capi- tal formula below. o If taxable income exceeds the threshold limits of – $207,500/$415,000, then the 20 percent de- duction is compared with the wage and capital formula below: (a) The formulas for the wage and capital asset limitation deduction amount is lesser of 20 percent of the taxpayer’s qualified business income, taking into consider the qualified trade or business. (b) The greatest of 50 percent of the W-2 wag- es paid and deducted through the company, or 25 percent of company wages plus 2.5 percent of the qualified unadjusted basis of qualified property. The new rules provide opportunities and new plan- ning tools for small pass-through businesses to de- velop a roadmap to less tax. A roadmap to less tax may include entity selection analysis, recalculation of owner wages, or reclassifying contractors to W-2 em- ployees. Yet, all these strategies must be implemented and maintained properly. Will your business opera- tion create the 20 percent tax deduction for you? If you are doubtful, reach out to a tax advisor for expert tax planning and advice. Limits on Business Interest A new provision for large businesses, with average gross receipts of $25 million or greater, now disallows the deduction of interest expense of more than 30 percent of its EBITDA, or earnings before interest, taxes, depreciation and amortization. However, disal- lowed interest can be carried forward up to five tax- able years. 100 Percent Bonus Depreciation The new law makes it possible for businesses to im- mediately and fully expense depreciable assets in one year, instead of depreciating them over several years. The new law allows for a 100 percent direct deduc- tion (bonus depreciation) for property/equipment purchased and placed in service. It also permits you to retroactively dial back the clock to September 27, 2017 to find more bonus depreciation. Yet, it is only temporary, expiring on December 31, 2022. Old law allowed up to 100 percent deduction only in certain circumstances. Bonus depreciation applies to both new and USED property/equipment, where in the past just new property. Deduction and Credits Eliminated New law eliminates or restricts the following busi- ness tax deductions and credits: Domestic produc- Continued on Page A25 L ike Us On Facebook! 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