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Tax Reform is Here Last Minute Tax Moves for Business Owners

As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next.

Last Chance Deductions?

Year-end planning for 2018 takes place against the backdrop of a new tax law — the Tax Cuts and Jobs Act — that made major changes in the tax rules for business owners.

There are new limits on business interest deductions, and significantly liberalized expensing and depreciation rules. And there's a new deduction for non-corporate taxpayers with qualified business income from pass-through entities, among many other changes. 

Below is a list of actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you will likely benefit from at least one of them:

...For tax years beginning after 2017, taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified business income. If taxable income exceeds $315,000 for a married couple filing jointly, or $157,500 for all other taxpayers, the deduction may be limited based on whether the taxpayer is engaged in a service business (such as law, accounting, health, or consulting) and the amount of W-2 wages paid by the business. If you are close to exceeding the taxable income threshold, it may be advantageous to explore ways to defer income to 2019 or accelerate deductions into this year.

...More "small businesses" are able to use the Cash (as opposed to Accrual) method of accounting in 2018 and later years than were allowed to do so in earlier years. If you have been using the Accrual method and could qualify to switch to Cash, you may find it useful to hold off billings this month and accelerate your vendor payments by month end.

...Businesses should consider making expenditures that qualify for the liberalized expensing options on purchases of depreciable property (other than a building). For 2018, the expensing limit is $1,000,000. Expensing is now available for most interior improvements, roofs, and HVAC, fire protection, alarm, and security systems. Although we never recommend making purchases for the sole reason of saving taxes, the generous dollar ceilings that apply this year mean that many small and medium sized businesses that make timely purchases will be able to currently deduct most if not all their outlays for machinery and equipment.

...Businesses also can claim a 100% first year depreciation deduction for machinery and equipment—both used or new—if purchased and placed in service this year. The 100% writeoff is permitted without any proration based on the length of time that an asset is in service during the tax year. As a result, the 100% first-year writeoff is available even if qualifying assets are in service for only a few days in 2018.

After you have a chance to look over this list, let us know if you have questions on how these might apply in your particular tax situation.

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