Below is an overview of the tax provisions in the Tax Cuts and Jobs Act (TCJA) that have an impact on businesses. While this is not a comprehensive list, these are some of the more important elements of the new law. Please feel free to contact our office to discuss any of these tax provisions and how they impact you specifically.
- Corporate tax rates – The corporate tax rate is now a flat 21%.
- Net operating loss (NOL) deduction – NOLs arising in tax years ending after 2017 can only be carried forward, notback. A two-year carryback for certain farming losses is still allowed. The NOLs can now be carried forward indefinitely as well.
- Domestic production activities deduction (DPAD)– The DPAD deduction has been eliminated. However, a new deduction was created that many businesses will be able to take advantage of (see below).
- Qualified business income deduction (QBID) –There is a new deduction of up to 20 percent of qualified business income for partnerships, S corporations, and sole proprietors. There are limits based on income and type of business.
- Deduction for meals and entertainment – The 50% deduction for business-related entertainment expenses has been eliminated. Business meals are still deductible (50%) aslong as the taxpayer (or employee of taxpayer) is present, food/beverages are not lavish or extravagant, meals are provided to current or potential business customer, client, consultant, or similar business contact, and food/beverages are purchased separately if at an entertainment activity or the cost is reported separately on the receipt.
- Family and medical leave credit – A new general business credit is available to employers that offer paid family and medical leave to their employees. The credit is a percentage of wages paid to an employee while on family/medical leave for up to 12 weeks per year. The percentage can range from 12.5% to 25%.
- Code Section 179 – The maximum amount that maybe expensed under Code Section 179 has increased to $1 million. The phase-out threshold increased to $2.5 million. The expense election now also includes certain improvements made to nonresidential real property (i.e. roofs, heating, ventilation, air conditioning, and fire protection/security systems).
- Bonus depreciation – Business property acquired after September 27, 2017 and before 2023 is eligible for 100 percent, first year bonus depreciation.
- Moving expense reimbursements – Employers must include reimbursements for moving expenses in employees’ wages, subject to taxes.