The Tax Cuts and Jobs Act was the biggest overhaul of the tax code in three decades and provides significant opportunities for the self-employed. But, as always, there are a few areas that require an explanation from the IRS.
How does this impact small business owners and entrepreneurs?
For 2018, it is believed that small businesses are going to see savings due to three significant changes:
- Expansion of section 179 expensing. Under the new law, section 179 expensing increases to an annual limit of $1 million. This can significantly improve the tax write-off associated with the purchase of capital assets.
- Small business deduction. The new law allows individuals to deduct up to 20% of their qualified business income from sole proprietorships, partnerships, and S-corporations. The deduction is generally limited to 50% of the wages paid by the business entity, with exceptions.
- Corporate tax rate. The income tax rate for C-corporations was lowered from 35 to 21 percent. In addition, the new tax law eliminates the special tax rate on personal service corporations.
Confused? Taxes usually are confusing and we are here to help you out.
What can you do?
- Use technology. If you use a payroll system, make sure the company is keeping you informed about changes.
- Have a consultation with a CPA who is already well versed in the tax changes.
- Make your quarterly tax payments. We can estimate what you owe as quarterly tax payments and then make adjustments as more information is shared on the changes.
Entrepreneurs are often confused about taxes during the start-up of their business ventures. Like most people, they turn to the internet for advice. Unfortunately, the information that can be found online is often outdated and may not be accurate. Our staff is ready to sit with you, go through your business, and help you with a plan so the financial matters of your business, including your taxes, are easy to manage.