Tax laws have been constantly changing over the years. However, it is safe to say that it’s been over 30 years since there has been any significant change. Tax Changes Small business and Job Reforms Bill that recently passed is certain to impact everyone from individual taxpayers to business owners. In line with the previous sweeping tax reforms, this new tax act is likely to foster a great deal of business for accountants. The ideal way for accountants to take advantage of this potential boon is to demonstrate an intimate awareness of all the different ways the TCJA affects the majority of small businesses.
1. 20% Income deduction for most Small Businesses
Congress didn’t want small businesses to miss out on the party either, but they simply couldn’t lower the tax rate either. So, in order to give tax Changes to Small businesses a tax cut, Congress brought around a new tax deduction; the 20% Qualified Business Income Deduction. If the taxable income is less than $157,500 (for individuals) or $315,000 (for married) taxpayers filing jointly, then the deductions are generally 20% of the net income of the business. If the taxable income is higher than these threshold amounts, then a deduction can still be availed but the limitations and exceptions will apply based on the occupation and wages.
2. 100% Bonus Depreciation
Depreciation is a tax deduction that facilitates the writing off of the gradual wear, tear, and obsolescence of certain properties. Depreciation rules can be complicated, with varying types and degrees of deprecation on different schedules. For instance, many types of properties take as much as 39 years to reap the benefits of depreciation. Fortunately, Congress introduced Bonus depreciation to speed up the process to muster tax savings faster. Then in 2015, Congress shot up the Bonus depreciation deduction to 50% in the first year. Now, the new tax reforms bill bumps the deduction all the way up to 100%. It is likely to stay this way until 2023.
3. Retroactive Refunds
One chief tax benefit for business owners is retroactive tax refunds. Having paid taxes in 2017, 2016, 2015 — or possibly even 2014 — can earn a 3-year review of tax returns for missed tax savings. And making a cut in the 93% of business owners who have paid too much in taxes, one can qualify for a retroactive tax refund. Fortunately, this law was not changed in the tax reform bill.
4. Mortgage Interest Deductions
Mortgage interest deductions will continue to exist. But only a few people will be claiming the deduction on their tax returns. Deductions can either be itemized individually or can take the Standard Deduction. Whichever method renders larger deduction is what would be considered for return. However, there was one key change to the mortgage interest deduction. The deductions have now been limited to new mortgages of $750,000 or less – down from $1 million in 2017. The mortgages originating before 2018 of $1 million or less are grandfathered in and keep their mortgage interest deduction.
We at Velan are equipped with skilled tax preparers possessing over a minimum of 7 years of experience in the domain of Taxation CPA Services. Available round the clock at your disposal, we cater to services with the utmost sensitivity and sensibility that the work demands. With encomiums and testimonials speaking for themselves, one needn’t think twice before calling us. Our prices are highly competitive and guarantee international standards in terms of delivery. We cost less than an in-house tax preparer’s salary exclusive of his paid vacations, incentives, and bonuses.
It’s time for a better bookkeeping & tax service for your small business
Not only do we regularly keep updated with the latest tax laws, but support high-end infrastructure which allows us to function as a virtual extension of our client’s team, while ably providing our cost-friendly services.
If you have any queries related to your tax returns feel free to contact us for detailed information, we will be glad to assist you.
Call us today!!! And give your business the head start that it deserves!