2018 Tax Changes For Businesses (2018 Business Tax Rules) Tax Cuts and Jobs Act 2018
Hello YouTube. Mike the CPA here welcome. Back to money in life TV thank you for joining me I am, so excited to see you guys today because I have some great information to, share with you and, this has been a long time coming, and I've got nick request, after request after, request to make this video well, finally, it's, here. In. Today's video we're covering the 2018. Tax updates for, business. Owners from, the tax cuts and Jobs Act I've pulled together what, I consider, to be some of the biggest changes from. The tax cuts and Jobs Act and put it in the spreadsheet for you guys and the, spreadsheet as you know just, like the one I'd made in my individual, tax update video is completely. Free for you to download so, just go to this certain section, below this video you're gonna find a link click, the link and then, in the top right corner there's a little button if you click that button you, can download it for free for yourself and you'll have this information, so you don't forget what we're gonna talk about now. I'm gonna try to go over this information as quickly as possible with you guys I'm, gonna try to cut out a lot of the BS and just get straight to the point if you guys have questions which, I'm sure you're gonna have questions because, I'm gonna go over this information pretty, quickly or as quickly as possible leave. Those questions in the comment section down below I'll be happy to get back to you as soon as possible if I can answer your question and if, just leave, a comment, in general I love ridding your guys comments and I love hearing from you guys let me know what you think of all these new business tax, law updates do you like them do you not like them I would love to know what you guys think if you liked the video let me know by hitting that like button down below it means a lot to me when you hit that like button and of course welcome to anybody, who's brand new here today especially if you're checking out the channel for the first time this, channel, is all about helping people become, fiscally, fit because. We teach finances. Investing. And taxes. All right, let's, get, it first thing I want to point out guys is that some of these tax revisions may change the IRS has not released guidance on a lot of the stuff we're going to discuss today so just keep that in mind before, acting, on any of the information you see in the spreadsheet realize, this is not legal or tax advice the. Rules might have changed by then based upon when, the IRS releases, their guidance but I really think this, video and the spreadsheets going to give you a great overview of, many, of the changes of the tax cuts and Jobs Act the. First thing I want to point out is the filing, due dates these, have changed some of you realize, this some of you may have not the due dates for partnerships, LLC's and single, member LLC's that are owned by partnerships, that. Is the due date is now March 15th the, same goes with S corporations, C, corporations, used to be due, on March 15th now they're due on April 17th, each unity type can get a six-month extension so, partnerships, LLC's etc. Can be extended for, six months until nine, seventeen S. Corporations. The same way and C, corporations, can be extended six months to October, 2018. If you, have a corporation, or a business entity that has, a non, calendar, year end then, follow these rules of how many months after the year end of when your tax return filing is due one of the biggest changes is to the corporate tax rates in 2017.
The, Corporate, tax rates were on the graduated, scale so as your income went up of your corporation, so would your taxable, your tax rate but, now in 2018. It is now a twenty-one percent flat, tax across, the board so you don't get the lowest rate but you don't get the highest so, overall corporations. Are saving quite a bit under these new rules this. Is set to remain permanent, many if you remember many of the individual, tax laws were. Set to expire after about five to ten years while these business, laws are set to remain permanent, note for non calendar, urine companies expect. To use a blended rate of tax using, a weighted average method calculation. Okay. Let's look at the example, of the weighted average method think, of a corporation, with a fiscal, year ending, of June 30th, in this. Example the. Tax rate from July, 1st of 2017. Through. December. 31st of 2017, would, be 34%, roughly right well. Then we have to take into account from. January, 1st through, June. 30th, of 2018. It, would use the new tax rate of 21%, and, so you're kind of using a weighted average to, figure out your taxable, income and that instance, a couple. Of depreciation updates, real quick guys and there's a lot of them but I've just kind of condensed, some, of the main ones down and remember. There's links to all this stuff down below that will lead you to a lot more information but, you're gonna see that into the spreadsheet here okay guys here's some quick depreciation, updates which I think you should know about in, 2017. For bonus depreciation we. Got 50%, of qualified property so we can deduct 50%. Of that property. Right away in, 2018, it's even better so in 2018. Now we can you deduct anywhere from 50 to 100%. Bonus. Depreciation in, the first year on qualified. Property and just so you guys know those. New bonus rules went into effect as, of, 9 28th of 2017. So, it started in September of 2017. It's gonna carry forward from there and I don't know if there there might be some rule, changes on this in starting, in 2020. 2021, but, we'll have to wait and see section. 179, in, 2017. We can expense, up to five hundred and ten thousand, dollars of eligible, assets that, can take 179. 2018. That's even better we. Can take up to a 1 million dollar section, 179, deduction a couple, things to point out here on the side so you guys can see this section, 179, cannot. Drive your income below zero but bonus can section, 179, asset, threshold in 2018. Is now two and, a half million just, so you guys know it used to be around two million. Appreciation. Updates for autos in 2018. The maximum, depreciation. We could take in the first year without using, bonus was. $3160, fast, forward to 2018, in the first year without even using bonus we can deduct up to $10,000. Through, depreciation on that vehicle, awesome, awesome, now. Let's look at it with bonus so in 2017. With. Taking bonus you can deduct up to eleven, thousand 160 and the same looks to be true for 2018, you can deduct up to eleven. Thousand one hundred sixty dollars and with, bonus depreciation in, the first year, remember. Guys the deduction is limited if the vehicle is not for 100% business use these, rules apply up, until January, 1st of 2020, and then we'll see what happens from there standard mileage rates I've.
Listed This all out for you guys you guys can go ahead and read this for the business mileage turtle, mileage medical moving, not. Much has changed really it's like a penny here penny they're not a big deal one of the biggest changes guys is the rules around mills and entertainment, and fringe benefits so let's look at that right now entertainment, and 2017. Used to be 50% that deductible now, in 2018, it is no longer deductible, entertainment, for a client so you take a client out to a movie out to dinner or whatever was. 50% deductible. Now, it's no longer deductible. Employer, operated eating, facilities so let's say you're a big business and you have let's say a subway within your art like, a huge cafeteria, or something within your establishment. So. The eating, facilities in, 2017. Used to be 100%, deductible, but, now in 2018, there are only 50%, deductible, transportation. Fringe benefits, used, to be fully deductible so this is really for employees, so like the company would pay for. Their employees, transportation, cost and they could fully deduct them while, starting in 2018, this, is a kind, of a bad thing for employees it's, no longer deductible, for the employer so so. The employer can still give the benefit but, now it's gonna be included as taxable, wages on that employees w-2 if they're, getting paid or compensated, for transportation, costs meals for convenience, of the employer so this is when an employer, brings in mills to their office so, that employees, don't have to go out and about they can eat eat their meal right there and keep working so, in 2017. I was 100%, octuple 2018. Going forward is only 50% deductible, okay now let's talk about mils in general, and this includes, meals for travels in, 2017. It was 50% deductible, mils are still 50% deductable, in 2018, so those haven't really changed what. About office, holiday parties. 2017. Fully, deductible 100%. Deductible 2018. It is still 100%, deductible, but. What about other, things like employee, gifts, and awards so, in 2017. Cash gift. Cards tickets, etc it. Was up to $400. Per award, up to $1,600. Per year per employee now. The rules have changed for 2018, so, now it, can no longer be cash gifts, gift cards and things like that now, the gift, must be tangible, personal property no. Cash no certificates. Gift cards tickets etc so, that really bites for employees when they could have got cash or a better gift but, the rules have changed on that okay, real quick guys under entertainment, just some examples if you're like what is entertainment it's things like sporting events activities clubs things like that before employer operated and eating facilities as we discussed there's, gonna be no longer deductible, after 2025, last, thing on a mission on this guy's is meals for convenience, of the employer it's, supposed to be no longer deductible, after. 2025. So just keep that in mind the last thing I want to say guys regards. To Mills entertainment, things like that for accounting, purposes, I say. No I recommend, tracking entertainment. And mill expenses, separately for accounting purposes break. That information, out for your CPA, if for your accountant it will save them a lot. Of time and save you guys money on, your books if you use.
A CPA, or an accounting, professional, to help you keep keep your books up to date okay now with excessive, business losses IRC, section 461. This, really applies the pass-through entities so. In 2018, there's gonna be limits on how much of a loss you can deduct for, 2018, for a single individual its 250,000, for a married couple as 500,000, is the excessive business loss limitation, a couple, of things to note on that aggregate. Tax loss from all treszura business is included. In that calculation and excess. Losses, if you can't use them the good news is that they, will carry forward and, there's. No animal carry back which we're going to talk about right now but those excessive, business law can carry forward to a feature basically. What used to happen guys is let's say a person had a really successful business well. Then they would go open up a restaurant dump, millions, of dollars into this restaurant and try to deduct the full thing you, didn't use it as like a huge expense, offset, for tax purposes well the IRS is hammering down and they're no longer gonna allow that hey, guys a lot of updates on net operating losses in 2017. You could do it you could carry back the last two years or carry. Forward, the loss or 20 years in, 2018. The, carry back provision, is now repealed. So you can no longer carry a loss back to previous years where you had income you can only carry it forward also in 2018, note that the net operating loss is limited, to 80 percent of taxable income other things to mention pre. 2018. Annals must be used up first animals. Can only be carried forward starting in 2018. But. Can remember, guys the good news is these animals can be carried forward indefinitely, so those are some of the changes, going on with net operating losses, my advice to you guys is if you have net operating losses that you want to carry him back do. Them now before you can no longer do it business, interests deductions limitations, this area was huge a lot of things going on here guys so now there's, the new limits, cap basically, 30% cap on interest deductions so, the rules state before 2022. The cap limit follows 30%, of earnings before interest taxes. Depreciation adjustments. After, 2022. It follows earnings before interest in, taxes it's important to know that net operating losses, will affect this calculation, in regards to the carryover period on this guys if you, can't deduct the interest in that year there's, an unlimited carryover, of disallowed interest so just keep that in mind there are exceptions, to the interest cap rules and, that is when interest is used to offset business interest income or. Using, when a lectin real property. Business or for. Regulated, Atilla tees are some, examples, of when the exception, applies I also, remember gross receipts less than 25 million average, in less than three years there, you. Would not have to follow these new rules you, would not be limited so as long as your gross receipts are under 25 million dollars you, would not be subject, to these interest. Deduction. Limitations, okay guys business research expenses, there's a lot of debate going on this one so, rules before 2021. Expenses. Are allowed, to be deducted when, paid or, occurred and/or. Can be elected, to capitalize, and amortize it should. Not affect their R&D credit, rules. Starting, after 2021. Expenses. Must be capitalized, and amortized over, five years 15, years if outside of us so, it's supposed to have no effect on the R&D credit but we'll wait and see what happens with that so. After 2021, basically. With research expenses you have to capitalize them over, for at least five years like. Kind of exchanges, oh guys, this is some big changes here exchanges, other than for real property have been eliminated so, personal, property so what I see a lot is people will trade in especially. In a business environment people will trade in their trucks or other business, vehicles or machine your equipment well, you, can no longer do. A trade in on those items and defer, the tax on those you're gonna have to pay tax at that point in time when, the item is disposed of so, though really what they're saying here is the only items that really qualify, for a true tax-deferred.
Exchange At this point is real, estate so buildings, and land and other real property, like. Said I put it right here that vehicles, are not considered, real property I think this is gonna upset a lot of people some, assets, involved in real estate exchanges. Might, actually be taxable during, the exchange so, if you think of a home like let's say our building, there's, other things involve that building there might be fridges, stoves other. Units of that, kind of sort that, is not, considered, real property so, when you're doing a light kind of exchange remember. You might have to pay taxes, on those other items you won't pay you will you'll be able to defer the tax on the building of the land but. Not the other items that are in the building last but not least guys the, $1.99, a deduction, and just so you guys know I've listed, some of the key facts here about this deduction and we, don't even know all the rules on this yet the IRS has virtually released, no guidance on these new rules so, we're gonna have to wait to see what happens but this. This is what we know so far so I'm not gonna do a full calculation here guys this is by far the most complex. Tax. Change in years and it's some people say it's more complicated, than the tax reforms, that have occurred back in 1986, if I, try to explain the calculation, to you guys I would probably lose you there's, a lot of uncertainties, about this steal so, we're just gonna have to wait and see if you guys would like. Learn more information I can eventually do a video on it but but let me know so, this is for help that n of these that are eligible for this $1.99, a deduction, include partnerships S corporations. Sole proprietorships, and AG cooperatives, eligible. Taxpayers individuals. Trusts. Estates, key. Facts regarding one I need an A it's, 20% deduction, on, qualified, business. Income, and there's a lot of debate on what, actually is defined, by, qualified, business income some people wonder, if real estate income is business, income it's, still up in the air the IRS has not released any guidance on this it. Cannot, generate an NOL so that's important remember and there. Is no deduction. Or offset allowed against self-employment, tax all right let's. Look at the income limitations, on one AAA so. If your filing status is single you'll. Get the full 20%, deduction if, your taxable, income, now we're now, listen though I'm saying your taxable, income now I told income taxable income is less, than a hundred and fifty seven thousand, five hundred if you, get if your income is above. Two hundred and seven thousand five hundred it is likely you'll receive no benefit, all from one ama if you're. Married filing joint, if your, taxable income is less than three hundred and fifteen, thousand. Dollars then. You'll get the full 20% $1.99, a deduction, on your business income if, your. Income if you're married filing joint your income is above, four hundred and fifteen thousand dollars then. You'll probably have, yeah, basically. Will get no deduction at that point using, 199, a now. The good news here is guys is virtually. What. This is saying that is if you have this. Deduction is really, awesome I mean it really is because let's, say your tax little business income is $100,000. Well. If, you get a 20%. Deduction, it. Reduces, your taxable, business income by. $20,000. That's, a huge advantage you get a huge tax savings right there because that's a lot of money that no longer has to go to the IRS the good news is if you think about it is that most people this, income is gonna be below this so, most, people who own a business I would expect, them to be able to get the full 20 percent 109, a deduction, it's, just for the very wealthy the people who are very very well-off will not be able to get it, you, get the full deduction or it will be a limited, deduction alright so let's talk about the w-2 and non adjusted basis limitations, it's called the phase-in so. This is where it gets really complicated but the limit is this, and this all deals with $1.99, a the, limit is greater of 50%. Of w-2, wages or. 25%. Of w-2 wages plus two and a half percent of on adjusted basis we, don't know if they mean my own adjusted basis we're assuming they're just talking about the on adjusted, basis.
Of The book value of the assets but, it's not been defined by the IRS yet so we don't even know what, they're gonna have rule on that the. Phasing occurs when taxable income exceeds. Three hundred fifteen thousand dollars when married filing joint which we just talked about right up here or it. Exceeds one hundred fifty seven thousand five hundred when you're filing single, so, these are just some of the key facts guys and I, a couple, thing to note there's a lot of limitations on service, oriented, businesses, so. I've put in a I, put a note in about that it says no special, limitations, may, apply for specified, service businesses which industry. Which includes any. Trainer business involving, the performance, of, services. Examples, include health care law, accounting, consulting. Financial, services it also, includes, investing, and investment management or trading so, that those, businesses, aren't, getting this they, might, have further limitations, applied so, they may or may not receive, this deduction basically. The way I understand, it is if their taxable, income is below this they're, still gonna get the deduction. But. If their taxable, income overall. Is above this then. They're gonna struggle to they. Might have a very limited deduction, from one on the a or they, might get no benefit from it at all so it just depends but they're really harping. Down and hammered down on service businesses ok guys a couple other things to mention real quick hobby loss rules income, from a hobby is taxable, but. Expense, deductions. Are no longer attack deductible, this in my opinion really kind, of takes me off but so, if you if a person has a hobby they, if they make income they're supposed to report that income but, now if what they're doing is a hobby they, can't offset. That income with, expenses, I honestly. Wonder, how many people are gonna report that income in the first place knowing that they can't even deduct anything, against it. Now for anybody who has a hobby or their, business has been deemed as a hobby do, the best you can to make it a legitimate business, so that all the deductions and, all the expenses, you incur to. Generate, that income become. Tax-deductible that's my advice for you is try to make it a legitimate business. You know maybe mean. An attorney get an operating agreements depending, on the kind of business it is form. You know like the corporation, or partnership whatever. But, just, try to run it like a real business so that you're not subject to these silly rules that expenses, are no longer deductible, the minimum tax credit for corporations, refundable, up to until, 2022. Refundable. For any tax year beginning after 2017. And before, 2022. In an amount equal to 50%, 100, percent for tax years beginning in 2021, of the, excess MTC, for the tax year over the amount of the credit allowable for the year against regular tax liability I know, I lost you guys there but go ahead and you can go back to the spreadsheet and reread that and I think it'll make more sense to you know master production activity, deductions, are been repealed but. The good news is and you, get the one idea and a deduction, so, it's not not all is lost not all is lost guys I went over this pretty fast I intended, to I really wanted to get straight to the point and make this can video. As, short and concise as possible all, my, links all the, links I used, to, pull, this information, and inform, this whole spreadsheet are down, here and you'll find it by subject, as I've, color-coded it, with, the color coding, above for. Each subject you can find more information, about all these different topics and all these different articles is by clicking these links and, it'll take you right to it okay, guys I hope you enjoyed the video I hope you got something out of that I spent, a lot of time, it took, me several nights during the week to, make, this spreadsheet took me hours to make the spreadsheet because.
I Couldn't find anywhere on the entire internet where it summarizes, this information, anywhere. Like this so, this is my treat to you guys you, guys have requested it thank you for that request I think, it's a great topic is a fun thing to talk about all. Right guys it's sum this all up I think if you're a business, owner I think, these new tax, laws are probably going to be pretty favorable, to most business owners but let me know what you guys think I think, there's there's a lot of new changes with these new tax reforms, this is actually I don't know if you guys know this but this is the largest tax reform, we've had in this country since 1986. So it's a tremendous, amount, of changes but, we'll see how the regulations, roll out and see, what, the IRS provides as guidance especially, on the one ninety nine eighty duction there's, a lot yet, to come on that so we'll just wait and see and if you guys have any requests on any of these topics let me know and I can make a video about it but, the topic. Can I could I could probably make a tenth a twenty minute video on each one of these topics because, they're, so broad and so detailed with. All the new changes involved but, this was just a simple overview so I hope you guys got something out of it remember, if you like the video guys to hit that like button to let me know you liked it be sure to share this information with a friend especially if you know somebody who is a business owner honestly. Feel free to share the spreadsheet with whomever you think it would help I'm, gonna leave a link to this video actually. Within the spreadsheet near, the bottom of the spreadsheet so, that anybody who wants to can go back and review this information at any time and I, just would love to hear from you guys so please drop, a comment down below before you leave and with that being said thank. You so much it's such an honor to be able to produce videos for you guys and interact with you guys over YouTube so, I will look forward to reading your comments and questions and all that good stuff I hope you're wherever you're at you're having a wonderful week and with, that being said I hope you use this information to, live, your life on Kage I will, see you guys in the next video be, sure to subscribe if you haven't already all right bye guys peace.