Minnesota Real Estate Investors Association, Inc.

The TCJA And What It Means For Your Business

Utah Real Estate Investors Association

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"Tax complexity itself is a kind of tax." - Max Daucus

A, B, C, D, E, F, G ... something, something ... T, C, J and A.

Remember when the alphabet meant singing songs in class? We don't really either...

But now, thanks to those last four letters, it means small income tax rate reductions for individuals, and larger ones for corporations. The Tax Cuts and Jobs Act (TCJA) was signed on December 22nd, 2017 and brought many new provisions with it.

As far as Salt Lake County businesses are concerned, the new law is worth looking into. If you have yet to do so, my goal below is to highlight some specifics before your eyes glaze over ... I do remember that from school.

I will say up front: If this is overwhelming to you, there's a simple solution -- have us handle all of it for you. But if you want to tackle it yourself, here are some notable components of the law that went into effect.

And again, this is a mere overview. There is PLENTY more where this came from.

Section 199A

This is an extremely important provision under the TCJA. Under its rule, sole proprietorships, LLCs, partnerships, S corporations, trusts and estates are allowed a deduction up to 20% of qualified business income.

Is there more at stake? Of course. There usually is. I've written extensively on this subject before, but you may also trudge through Forbes' Tony Nitti's article on Section 199A, if you have a free weekend.

Deduction Limits

Let's eat. As a part of the new law, you may continue to deduct 50% of the price on business-related meals as long as the taxpayer is present. In addition, the meals cannot be labeled "lavish or extravagant". So go ahead and skip the escargot. (Shouldn't you anyway?) You can apply this law to current or potential customers as well as clients or other business connections.

Another item worth noting: there are new limits on the deduction for business interest expenses. The new provision explains that your deductible business interest is limited to interest income plus 30% of adjusted taxable income and floor-plan financing interest (with some exceptions).

Like-Kind / Be Kind

Under the TCJA, like-kind exchange treatments only apply to certain exchanges of property. Pretty straight forward there. Form 8824 will help you gain a further scope of which exchanges are outlined.

There is also a completely new provision in regard to sexual harassment cases: certain payments toward any such case are ineligible for deduction. The easiest way to avoid worrying about this law? Ensure your employees value one another's emotional and physical well-being before it becomes an issue.

All is Not Lost

Working men and women who are not incorporated, like farmers, might be liable to excess business loss limitations. Excess business losses are defined as total deductions attributable to trades or businesses exceeding total gross income and gains for those trades and businesses plus $250,000.

And a new Net Operating Loss (NOL) provision means many Salt Lake County taxpayers no longer have an option to carryback an NOL.

Wrap-Up

I know things got a little hairy there at the end, but I wanted you to know some of the important new TCJA rules for businesses like yours specifically.

Because the TCJA was signed into effect for 2018 through 2025, many of these laws could theoretically be scrapped when 2026 rolls around ... but let's not worry about that just yet, shall we?

In the meantime, let me know if you have any questions or if we can help your business in any way. It's why we're here. It's why we went to school and sang alphabet-songs in the first place. :)

BE THE ROAR not the echo! 

Feel free to forward this article to a business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

Warmly,

 

Janet Behm

(801) 278-2700

Utah Real Estate Accountants

 

 



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