There has been a major overhaul of the tax code with the Tax Cuts and Jobs Act. But what you may not know is everything that is changing for corporations and businesses. Curious what changes you can expect to see? Let’s take a look at some of the major tax changes.
The tax rates for corporations have been reduced from 35% to 21%. This reduction officially began January 1, 2018, and is a permanent change. This will incentivize business to not only bring profits back into America, but also provide immediate benefits to employees in the form of bonuses, higher starting wages and increases in benefits provided.
If you receive domestic qualified business income from a partnership, S Corporation, or Sole Proprietorship, you are now allowed to deduct 20% of that business-related income. The remaining income will be subject to normal individual tax rates. The deduction is only allowed to reduce any taxable income and does not reduce income subject to self-employment tax. Also, it is not allowed for businesses offering certain personal services.
For join filers the deduction rate phases out with income between $315,000 and $415,000 and between $157,500 and $207,500 for others.
The reason for this provision is to provide an alternate limitation based on wages and capital. There are some restrictions on the limitation so be sure to reach out to us to learn more.
There have been a few major changes when it comes to entertainment expenses. The first one being that deductions are not allowed when it comes to the following three items:
- An activity generally considered to be entertainment, amusement or recreation.
- Membership dues with respect to any club organized for business, pleasure, recreation, or other social purposes.
- A facility or portion used in connection with any of the above two items.
Along with these changes, there have also been changes in that deductions are not allowed for qualified transportation fringes (vanpooling, bicycling, and work-related parking costs), with the exception of ensuring the safety of an employee.
However, you are still able to deduct 50 percent of food and beverage expenses that may occur with operating your business; this includes meals that employees have while traveling for work.
To learn more about the tax reform changes for both individuals and business, check out last month’s blog. Also, should you have any questions about the changes, don’t hesitate to give us a call at 610-775-9216.
A Mazzo Accounting provides a variety of tax and accounting services to individuals and businesses in the Wyomissing, Reading, West Reading, Sinking Spring and Kenhorst areas, as well as towns and villages around the Greater Reading area. Our services for small to mid-size businesses include taxes, payroll services, accounting services, and bookkeeping services. We also provide a variety of services for individuals and they include tax return preparation as well as some accounting assistance.