Tax Changes Affecting Businesses

  1. Corporate tax rate – The tax act provides for a 21% flat corporate tax rate.
  2. Corporate Alternative Minimum Tax - Beginning in 2018, the alternative minimum tax is repealed.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.
  3. Cash method of accounting – C corporations will be allowed to use the cash method of accounting as long as average gross receipts do not exceed $25 million; formerly $5 million.
  4. Bonus depreciation – Expense 100% of cost of property acquired and placed in service after September 27, 2017 and before January 1, 2023.  No longer must be original use property but must be taxpayer’s first use of the property. Phase out begins in 2023 through 2026.
  5. 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. The act further expands the definition of §179 property and the definition of qualified real property for improvements made to nonresidential real property allowing a deduction for subsequent improvements to commercial real property for roofs, heating and A/C, fire protection and security systems.
  6. New deduction for Qualified Business income for Individuals – The act creates a new deduction of, generally, 20% of qualified domestic business income from a sole proprietorship, partnership or S Corp.  This deduction reduces taxable income but not AGI.  The deduction is subject to limitations; however, the limitation does not apply if taxable income on the 1040 is less than $157,500 or $315,000 on a joint return. There is an additional limitation for specified service trade or business, such as doctors, lawyers, accountants and consultants. The deduction expires after December 31, 2025.
  7. Deductions for Income Attributable to Domestic Production Activities:-  Beginning in 2018, the deduction for income attributable to domestic production activities is repealed.
  8. Entertainment 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.
  9. New loss limitation for non corporate taxpayers – Net business losses in excess of $500,000 joint are not allowed but instead are treated as an NOL carryover
  10. 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 compared to the current 20 year limit.  No carryback is allowed after 2017.
  11. Like Kind exchanges (Section 1031) – Only real property qualifies for like-kind exchange treatment.