Learn What Tax Reform Means For You
As you may be aware, major tax reform legislation has been signed into law this year and resulted in sweeping changes to the tax code for the first time in about 30 years. Businesses should be aware of the provisions that have changed and plan now for how they effect you moving into 2018.
Palma Financial Services, Inc. helps put the Tax Reform pieces together.
Business Deductions and Credits
- Section 179 Expensing: The expensing limitation is increased to $1 million and the phase out amount to $2.5 million. The new limitations are to be adjusted for inflation.
- Research and Development Credit: The research and development credit is preserved.
- Deductions for Income Attributable to Domestic Production Activities: Beginning in 2018, the deduction for income attributable to domestic production activities is repealed.
- Entertainments Expenses Deductions: Beginning in 2018, no deduction is allowed generally for entertainment, amusement, or recreation; membership dues for a club organized for business, pleasure, recreation, or other social purposes; or a facility used in connection with any of the above.
- NOL Deduction: Beginning in 2018, the limit on the NOL deduction is 80% of the taxpayer’s taxable income and provides that amounts carried to other years be adjusted to account for the limitation. Amounts are to be carried forward indefinitely.
- Corporate Tax Rate: Beginning in 2018, there is a 21% flat corporate tax rate; there is no special tax rate for personal service corporations.
- Alternative Minimum Tax: Beginning in 2018, the alternative minimum tax is repealed. In 2018, 2019 and 2020, if taxpayer has AMT credit carryforward, taxpayer is able to claim a refund of 50% of remaining credits (to extent credits exceed regular tax for year). For 2021, taxpayer is able to claim a refund of all remaining credits.
- Pass-Through Tax Rate: Beginning in 2018, generally a 20% deduction for qualified business income is provided in lieu of tax rate changes. Special rules apply when computing the deduction. The deduction expires after December 31, 2025.
- Base Erosion: U.S. shareholders of CFCs are subject to current U.S. taxation on “global intangible low-taxed income” (GILTI) with a 37.5% deduction for foreign-derived intangible income. There is a revised definition of intangible property for purposes of §367(d) and §482. Clarification of Commissioner’s authority to specify method used to determine value of intangible property has also been provided. There is now a denial of deduction for certain related-party amounts paid or accrued in hybrid transactions or with hybrid entities. Dividends received by an individual shareholder of a surrogate foreign corporation are not eligible for reduced rates on dividends in §1(h).