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2018 Tax Law Changes for Business

Alternative Minimum Tax:  Effective for tax years beginning after 2017, corporations are no longer subject to AMT.

Bonus Depreciation: Additional First Year Depreciation is available to new and used property. The requirement that the first qualified use begins with the taxpayer is repealed.

Corporate Tax Rates: The Corporate Tax rate for C Corp is reduced to 21% beginning January 1, 2018 and is permanent

Depreciation:  Automobile Business Use depreciation limits have been increased and indexed for inflation. For vehicles placed into service after 2017 the new limits for vehicles not claiming Bonus Depreciation are as follows: 1st Year: $10,000 2nd Year: $16,000 3rd Year: 9,600 4th Year and After: $5,760

Pass-through Entities:  Non-corporate taxpayers, including trusts or estates, who have domestic qualified business income (QBI) from a partnership, S corporation, or sole proprietorship are allowed to deduct 20% of business-related income, subject to certain wage limits and exceptions. The remaining income is subject to normal individual rates.

The 20% deduction is not allowed in computing adjusted gross income (AGI), but rather is allowed as a deduction reducing taxable income. It does not reduce income subject to SE tax. The deduction is also not allowed for businesses offering certain personal services.

The deduction ratably phases out for joint filers with income between $315,000 and $415,000 and between $157,500 and $207,500 for others.

This provision provides an alternate limitation based on wages and capital. The limitation is the greater of 50% of the wages paid or 25% of the wages paid plus 2.5% of the unadjusted basis of the business' capital assets.

 

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