Tax season is just around the corner, and businesses are finalizing their year-end financial strategies ahead of the new year. We’ve compiled a few tips and tricks to ensure you’re exploring every available option for 2018.
- Consider switching to the cash basis of accounting
The threshold was raised from $5 million to $25 million. Taxpayers that have never qualified to be on the cash basis can now take the advantage of potentially deferring revenue.
- If you purchased a new building or did a major renovation, consider a cost segregation study
This will move items from 39 year to 15, 7, 5-year classes.
- If you offer paid leave put the plan in writing
TCJA put in to place a tax credit for Family leave credit of 12.5% of wages paid to the employee so you will qualify for this credit.
- Track meals and entertainment in three separate accounts
100% deductible meals, 50% deductible meals, and an entertainment account which is nondeductible. Make sure that all entertainment related meals are stated separately on the invoice to avoid them being labeled with entertainment and being nondeductible.
- Employees can no longer claim miscellaneous itemized deductions, cannot exclude moving expenses reimbursements, and the deduction for business meals and entertainment was also impacted
TCJA made a large number of changes on the individual side relating to benefits that could impact employers. Employers should review their internal policies to determine if they should make policy changes to the reimbursements to the employees related to business expenses.
- TCJA made some significant changes to encourage business to expand and invest in new property
TCJA provides for 100% bonus depreciation on used and new property. Section 179 expensing was raised to $1 million, with a $2.5 million investment limitation.
- Qualified business income deduction allows for a 20% deduction from the lesser of taxable income or the taxable income from sole proprietorships, partnerships, trusts and S corporations.
Depending on the owner’s income levels this deduction could be limited. It is important that that these income levels are looked at before year-end to determine if additional wages or property investments would increase the deduction.
- Businesses may want to consider an entity change
The corporate tax rate was lowered to 21%.
- Tax Cuts and Jobs Act established Qualified Opportunity Zone Programs to provide a tax incentive for private, long-term investments in economically distressed communities
Investors in these programs are given the opportunity to defer and potentially reduce tax on recognized capital gains.