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Tax Cuts and Jobs Act

Signed into law in 2017, the Tax Cuts and Jobs Act will bring changes to both corporate and individual taxes in the hopes of stimulating the economy and creating more jobs. Highlighted below are just a few of the changes for 2018. The information provided below is not intended to be a comprehensive list and for application of the new law to specific cases, a tax advisor should be consulted.

Corporate Tax Changes: Here are some of the changes to the corporate taxes.

  • There is now a 21% permanent C corporate tax rate. The old law provided a graduated tax that started at 15% on the first $50,000.

  • A one-time transition tax for repatriation (money earned in another country) which will be 15.5% for liquid assets and 8% for physical assets.

  • For net operating losses, the old law allowed companies to go 2 years back and 20 years forward. The new law will not allow carry back, but there is no limit on carry forward, but losses are limited in future years to 80% of the pre-NOL profit.

  • For depreciation, the 50% bonus depreciation goes to 100% depreciation for the next five years. The Section 179 cap is raised from $500,000 to $1,000,000.

It is important to note that the IRS released the 2018 withholding schedule on January 11, and payroll departments should start using them as soon as possible, but no later than February 15. The new withholding tables have been designed to be used with 2017 Form W-4, so employees do not need to submit a new one. However, the IRS is in the process of designing a new form that should be ready in late February.

Individual Tax Rate Changes: Below are some of the income tax adjustments for 2018. In general, these provisions are set to expire in 2025.

  • The personal exemption deduction, which was $4,050 for 2017, is suspended.

  • The standard deduction for single taxpayers and married taxpayers filing separately increases to $12,000 from $6,350.

  • The standard deduction for married taxpayers filing joint returns increases to $24,000 from $12,700.

  • The standard deduction for heads of household increases to $18,000 from $9,350.

Again, this highlights only a few of the changes that are in place for 2018. For a more detailed understanding of these changes and how they might affect your company or you personally, seek the advice of a tax consultant.

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