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Business Tax Returns

Tax Reform 101: Important Changes for 2018

As noted in our two previous blogs outlining the new income tax reform bill, the law isn’t so much simplification as it is complification. Here’s an overview of changes affecting your individual income tax returns:

  • The tax rates dropped and the brackets widened, but the law still keeps seven of them (eight if you count the zero tax bracket). The 0%/15%/20% brackets for long-term capital gains and qualified dividends also stretched, especially the 15% bracket; the 3.8% Medicare surtax threshold didn’t change.
  • Primary residence sales exclusions are generally still exempt.
  • We didn’t receive much relief for trust and estate income tax rates, which barely budged.
  • The personal exemption was replaced with an enhanced child and dependent credit plan. The child credit increases from $1,000 to $2,000, but only until the young ones turn 18; $1,400 of that amount may be refundable if you have no tax to offset.

A new $500 non-refundable credit is added for other qualifying dependents, like older kids and parents. Credits for the elderly and permanently disabled survived.

  • The standard deduction jumps from $6,350/$9,350/$12,730 (Single-MFS/HH/Joint) in 2017 to $12,000/$18,000/$24,000 in 2018, so more than half of all itemizers will no longer do so. The add-ons for blind and disabled will be $1,300 for married filers and $1,600 for all others.

Our recommended strategy to “bunch” deductions is even more practical, so that you might beat the standard deduction every other year.

  • The highly publicized maximum deduction for state and local taxes was compromised at $10,000, having a significant effect on the top 10% of some high tax state residents. In spite of all the noise, generally tax prepayments in 2017 won’t qualify for an early deduction.
  • Charitable contributions are still fully deductible, with the annual limits rising to 60% of AGI for cash and 30% for non-cash. Remember, you can bypass your annual IRA RMD income by passing it to a charity once you reach 70 ½. That’s especially valuable if you’re no longer able to itemize.
  • Casualty and theft losses are still harder to deduct – now they must be the result of a federally declared disaster. So, a typical house fire or major vandalism will no longer qualify. The 10% of AGI floor remains.
  • Another big hit for some is the elimination of most miscellaneous itemized deductions, those already subject to the 2% limit based on AGI, including expenses for business, home office, production or preservation of income, safe deposit boxes, union dues, tax preparation and advice, job searches, education and uniforms. However, Gambling losses are still allowable itemized deductions, and can now include related costs, such as travel.
  • Good news for those affected by the Pease phase out of their deductions since 2013 – it’s gone again.
  • There’s no change to the student loan interest deduction, educator’s expense deductions, education credits or deductions, or the adoption credit. However, moving expense deductions are gone and any reimbursements are taxable, except for those related to the Armed Services.
  • Alimony gets attention for decrees filed after 2018. The payment will no longer be deductible and the receipt no longer taxable.
  • Re-conversions of retirement plan Roth rollovers are not allowed after 2017. 
  • The “kiddie” tax is slightly simplified, in that it cuts the tie to the parent’s income and rates. Any material investment income will now be taxed at the trust rates mentioned above.
  • Section 529 plans now can pay for curriculum, books and materials, including online, tutoring outside the home, and educational therapy for the disabled. You can also pay up to $10,000 per student of these expenses for K-12. (Think this through, though, as your needs when your children attend college may be greater than they are now.)
  • The ACA individual mandate still lives, but the penalty drops to $0 in 2019. Since last year, the IRS was already instructed not to enforce it.
  • The annual gift exclusion rises to $15,000 in 2018 and the Estate tax exemption to $11.2 million per person. You may still want to file a return to elect “portability” between spouses. Step-up basis survived.
  • For those of us in the tax preparation business, we also received new rules. We must inquire about your qualification for the Earned Income, Child Tax and Higher Education costs.

For additional information and details on this historic tax legislation, refer to our Helpful Resources P&R Publications link.

Of course, if you need a proven tax accounting firm to assist you with individual or business tax preparation or financial planning, our team remains committed to you. We’re available to explain the law’s nuances to help you maximize this tax overhaul to your benefit. Contact us at Office@CPAsite.com or 904.396.5400.

Understanding the New Tax Reform Bill: Changes Affecting Business

In our last blog, we offered an overview of the Tax Cuts and Jobs Act and discussed items that affect your 2017 income tax return.

Now let’s look at changes affecting business income taxes (and associated business growth) in 2018, which will be reflected on your returns next tax season:

  • The big news is a flat 21% rate on C corporation income. Pass-through entities receive a special 20% deduction to take on the owners’ returns to provide similar tax relief, but there are some significant and interesting limitations.
  • Capital assets acquired after 9/17/17 are 100% deductible under bonus depreciation rules, phasing out after 2023. Real Estate is excluded. Section 179 deductions are allowed on up to $1 million of asset purchases, before phasing out completely when income is above $2.5 million per year.

Allowable items now include lodging furnishings and non-residential roofs, HVAC, alarm, fire and security protection systems. Remaining items are depreciated at lower real estate property lives of 25 years and qualified improvement property of 10 years. Grab this opportunity while you can, as these high profile provisions affect significant tax revenue.

  • Business entertainment now excludes amusement and recreational facilities, related membership dues, etc. Club seats and booster tickets will take a big hit here. Traditional business meals keep the 50% deduction.
  • Business interest is limited to 30% of gross revenue to discourage bond financing over stock.
  • The popular Domestic Production Activities Deduction stops for tax years beginning after 2017. Some business credits are repealed – employer-provided child care, rehabilitation, new market, and disabled access. R & D credits survive, but expenditures are now amortized over five years.

For additional information, we’ll be posting our annual tax newsletter to our Helpful Resources P&R Publications link soon, and it provides more details on this historic tax legislation.

Of course, if you need a proven tax accounting firm to assist with your tax advice and preparation to achieve the financial planning results you desire, our team is available to assist you.

Contact us at Office@CPAsite.com or 904.396.5400.

Tax Reform Arrives . . . Changes Affecting your 2017 Tax Return

Welcome to President Trump’s long-awaited tax bill, the Tax Cuts and Jobs Act. Since the reform purports to overhaul the entire U.S. tax code by making our individual and business income tax return process simpler, virtually all taxpayers will be affected in some way.

Is the tax reform law good or bad for you? You’ll need to run the numbers first, but suffice it to say the extent of your changes will likely depend on your income bracket, current filing status and typical annual deductions. Most will be in a better place, but it appears a few of us may need to tighten our belts just a bit.

After reviewing the major tax changes, some answers are available now, but many details remain uncertain until final regulations and forms are produced over the next year or so.

With 1,097 pages in the Act, we’ll highlight the 2017 income tax changes first, (with additional information regarding 2018 changes outlined in next week’s blog), many of which you’re likely familiar with already.

With some trimming here, some make up there, and a few unexpected surprises, your 2018 income tax return will look different. Until then, note some changes before you file your 2017 individual and business income taxes. Plenty of time remains to learn and prepare before planning next year’s taxes, since only three significant changes affect our 2017 taxes:

  • The medical deduction threshold dropped from 10 percent to seven and a half percent of adjusted gross income (AGI), but only for two years.
  • The mortgage interest deduction on your home is still limited to the interest on $1,000,000 plus that on the first $100,000 of a home equity line of credit (HELOC), unless your new loan initiated after December 15, 2017, for which the limit will be based on a $750,000 mortgage. New HELOCs receive no deduction. Refinancing will qualify under the old limits, but a cap remains based on acquisition costs.
  • Capital assets acquired after September 17, 2017 are 100% deductible under bonus depreciation rules, phasing out after 2023; real estate excluded.

After months of speculation, lobbying and political pontificating, we’re following a new, and some would say, improved, tax code. Most of us will be better off in some ways, but a few will be disappointed. This simplification of our filing process should prove beneficial, regardless of your tax bracket.

For additional information look for our upcoming annual tax newsletter, which provides more details on this historic tax reform. And remember, if you need a proven tax accounting firm to assist with your tax preparation or financial planning, our team is available to assist you. Contact us at Office@CPAsite.com or 904.396.5400.

New Year’s Resolutions . . . for your Business

For many of us, beginning a year wouldn’t be complete without the tried and true New Year’s resolutions. Scores of us vow to start eating healthier…exercising more often…and seeing your CPA regularly. Wait, what?

If you’re a fan of setting individual goals for the year, don’t forget goals for your business—something our proven accounting team can help you with. Now’s a great time to examine your company’s financial health and look for ways to keep it on track. Why not make a resolution to get you and your business in tip-top shape?

Considering adhering to a few healthy business practices for your company in 2018:

  • Review your books on a weekly basis:
    • Evaluate your cash flow forecast;
    • Make revenue projections based on past income sources;
    • Monitor your revenue earned and expenses incurred;
    • If an unanticipated monetary issue arises, rectify it in a timely manner.
  • Remain vigilant regarding tax planning parameters (and of course, we’re here to help!):
    • Make certain your business taxes are filed properly;
    • Review current federal and state tax regulations and changes;
    • Evaluate current IRS regulations regarding appropriate deductions and credits;
    • Stay informed about new tax laws and codes that may impact your bottom line.
  • Review growth and revenue objectives:
    • Did your company grow or shrink, and why?
    • Compare your revenue and profit margins from the past year to the year before. How effectively were your goals met?
    • Assess expenditures versus revenue to determine upwards or downwards trends;
    • Prepare for unforeseen expenses now to prevent future financial challenges.
  • Remain technologically savvy:
    • Update your website to feature new products and/or services. Content is king in the digital world, so keep it updated and current.
    • Offer a client-friendly App service to stay connected to your customers on the move. We even follow our own advice: watch for the new P&R App coming soon!

The beginning of a new year is an exciting time. You start fresh while planning for the new year’s successes. To make 2018 your best year yet for your business, consider adhering to these tried and true business resolutions.

And we’re here to help you stick to your plan: consider us your business growth consultants—so you can focus on your clients. We’ll help you run your company throughout the year. Contact us at Office@CPAsite.com or 904-396-5400.

With the New Year, We Introduce a New Name with the Same P&R You Trust

Your CPA team brings you warm wishes during this chilly start to the year and hope you’re anticipating a good 2018.

We’re announcing some news to start the year:

  • Adam left to pursue a new opportunity at Hartman, Blitch & Gartside. He’s been an integral part of our growth for more than 15 years and we truly wish him well in this new venture.
  • We added Tim to the firm name to become Patrick & Raines CPAs. We’re the same tax and accounting firm you know and trust, with a new name.
  • Even as some things change, others don’t: P&R remains a leader among locally-owned and managed CPA firms, serving privately-held businesses with tax and assurance services, plus those with individual income tax challenges.

Client service is—and always has been—our primary objective. Our approach to the complex world of finances is to make it as simple and painless as possible for you. Moving forward, the strength of our accountant team remains substantially intact, and we’ll continue adding staff with the expertise needed as we grow with you.

We’re humbled and honored you trust us to be on your team of financial advisors. Thank you for your many years of support, confidence and friendship. Your loyalty enabled us to grow and evolve to meet the demands of an increasingly challenging world.

Please contact us any time for assistance in meeting those challenges at Office@CPAsite.com or (904) 396-5400.

On behalf of the entire P&R Team and our families, we wish you a happy, healthy, and prosperous 2018!

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