With tax season just around the corner, it’s important that small business owners are up to date on changes that are a result of the 2018 tax reform laws. Business News Daily takes a deep dive on what small businesses should expect in 2019, writing, “Last year, Congress introduced some major adjustments to business tax law, including a lower corporate tax rate, new rules for pass-through businesses and a tax break for some industries. As these laws and regulations continue to be implemented, 2019 will be a year of adjusting to change as opposed to incorporating new ones.”
Below, we’ve highlighted some of the most important changes to remember as you’re filing this year.
Tax Updates to Keep in Mind
International business: There were regulation developments in 2018 that may affect small businesses that operate overseas. It’s best to work with a professional that understands international taxation and regulation to ensure you’re filing correctly.
SALT cap: There is a new $10,000 cap on state and local property and income taxes (SALT) as a result of the tax reform laws. Business owners that are operating a pass-through entity in a high-tax state should be aware of this change.
Deduction for pass-throughs and corporations: The new bill provides a 20% deduction for all pass-through businesses and corporate entities, however, there is a limitation on service-based businesses making more than $315,000 per year.
First-year bonus depreciation: The existing first-year bonus depreciation deduction has changed from 50% to 100%, providing businesses with more money upfront. The hope is that it will incentivize businesses to spend more, by investing back in the business or hiring new employees.
Net operating loss changes: These can now be applied for an indefinite amount of time, a change from the previous law, which allowed them to only be carried back for two years. While the change no longer allows businesses to restructure taxes that had previously been completed, the new indefinite timeline for net operating losses can be applied to 80% of taxable income.
For more information about important tax changes for small businesses, read the full Business News Daily article here.