What The 2018 Tax Cut and Jobs Act Means For Your BusinessJon Steiert
On Tuesday night during his first State of the Union address, President Trump talked extensively about the The Tax Cuts and Jobs Act which was passed at the end of December.
The Tax Bill is over 500 pages and full of new regulations that will surely impact your professional and personal lives. We wanted to get a better handle on all of these new guidelines and after doing our research, we wanted to share our findings with you.
Lower Tax Rates
President Trump talked at length about the need to reduce confusion across our tax brackets. While there are still 7 tax rates, 4 have been lowered with cuts ranging between 1-4%.
For the majority of Americans, this means more money in your take-home pay. You’ll need to review your withholdings as soon as your employer implements these guidelines.
Corporate Tax Rate Drops to 21%
For the 2017 Fiscal Year, the tax rate will be 35% as it has been in years past. Starting this year however, the maximum corporate tax rate will be reduced to 21% – permanently.
It’s a massive change that could provide major relief for small business owners across the nation.
The New World of Deductions
Compared to the 2017 fiscal year, standard deductions have essentially doubled and personal exemptions eliminated. Allowable itemized deductions have also been dramatically altered meaning that, overall, you’ll be seeing more money in your pocket.
Understanding your deductions this year will help you plan for next year’s 2018 tax obligations.
Recognize What HASN’T Changed
Tax Advantaged Savings Accounts haven’t been altered. These types of investments, which provide exempt from taxation, tax-deferred or offers other types of tax benefits remain just as attractive as they always have been.
It’s best to not alter your tax plans to contribute to your retirement accounts, like IRAs and 401Ks and to continue using tax savings accounts like HSAs & 529 (Education Savings Accounts).
The Individual Mandate Penalty, which was established during the 2010 enactment of The Affordable Care Act, will disappear in 2019. It’s still in place for 2018, however, so be sure to keep your health insurance active for the duration of the year or be prepared to pay the penalty.
Ask Your Accountant to Review Your Tax Situation
All of these changes can be very confusing, especially given that the bill was touted as a way to simplify the tax system.
Fortunately, Accountants, CPAs, and other tax professionals will be able to show you exactly how the Tax Act impacts your business directly. They’ll also be the best educators for you, personally, on the various changes this bill entails.
File Your 2017 Tax Returns
While you’re having that conversation with your accountant or accounting team, file your taxes. This will be the best way to get a grasp on how your tax situation could change in 2018.
You’ll also be able to get back any extra money that was withheld from you that you can put towards improving your business. However, if you find yourself on the other side owing money to the government, applying for an online business loan could be a good solution to get a jump start on your 2018 plans.