Here’s an idea that can be very powerful for some business owners. The 2017 Tax Act provides business owners with a 20% deduction on their business profits (Qualified Business Income or QBI). The catch is that the 20% is applied to taxable income if that’s lower. In other words, if taxable income is going to be lower than QBI, then you miss the opportunity to have some income that will receive a 20% deduction. Therefore, if you accelerate income, some of the cost of doing so will be eliminated by the increase you are creating with a larger QBI deduction. […]
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Deferring taxable income to a later year is often an effective strategy for paying less in income taxes and keeping more of your wealth working for you. For example, if you are organized as an S Corporation or Partnership for income tax purposes and anticipate being in the same or a higher tax bracket in 2018 than in 2019, then you may benefit from deferring income into 2019. Here are four ways you might achieve this: (1) Cash Method of Accounting The Tax Cuts and Jobs Act (TCJA) expanded the number of businesses that can use the cash method of […]
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The end of year is a busy time for many reasons. Travel plans, holiday hosting, and family visits tend to keep your calendar packed. But as a small business owner you have additional obligations that need to be addressed. The end of year is a perfect time to assess your current business, make some decisions, and set some overall goals to ensure you start the New Year off right. When 2019 rolls around be sure you took the time to self-assess with this Checklist: ( ) December is not too late to make a number of moves that can lower […]
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The Tax Cuts and Jobs Act of 2017 (the “Act”) has dramatically changed the tax landscape this year. Two important changes include the new 20% deduction for pass-through entities, such as S-corporations and partnerships, and the 21% flat tax rate for C-corporations. Where conventional wisdom once dictated that most small business owners elect S-corporation tax status for their companies (a “pass-through” option), these new rules should have owners re-considering whether C-corporation tax status might offer better tax results. In this post, we will compare S-corporation (pass-through taxation) and C-corporation (corporate taxation) tax classifications for business owners at two different income […]
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In our last post, we detailed many of the new individual and corporate tax laws. Here we’ll take a closer look at three practical steps you should consider taking in light of these. 1. Revisit the income tax classification of your corporation or LLC. For decades now, the S corporation has been the income tax classification of choice for most non-real estate businesses. The fact that it offers a single level of tax versus “double taxation” in C corporations has mostly been the deciding factor. Now, while C corporations still expose their owners to double tax (first on corporate income […]
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We plan to address the new 2017 Tax Act changes in a couple of ways. Below is a summary of many of the major provisions, both for businesses and individuals. Later, we’ll take a closer look at some practical steps you should consider in light of the new tax law. First, the corporate rate cuts are significant. The 2017 tax act provides for a 21% flat corporate tax rate. Businesses conducted as sole proprietorships, partnerships, or S corporations are subject to a special deduction under the 2017 tax act beginning in 2018. Business Deductions and Credits Section 179 Expensing: The […]
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