The new tax law reduces the corporate tax rate to 21 percent beginning in 2018, and makes that rate permanent. Under the new law, pass-through entities, typically small businesses, will see a 23 percent deduction of qualifying pass-through income. The provision expires at the end of 2025 and treatment would return to existing policies.
In the final days of 2017, Congress approved a landmark bill to overhaul the country’s tax code. “The Tax Cuts and Jobs Act” (H.R. 1), a comprise bill between House and Senate versions, represents the most sweeping changes to the U.S. tax system in 30 years.
The new law, which took effect Jan. 1, “is already influencing taxpayers’ behavior, with some companies announcing bonuses,” writes Naomi Jagoda, a reporter for The Hill, a Washington, D.C., publication. Residents in high-tax states also have been prepaying their property taxes —although the IRS has cautioned that approach may not actually produce hoped-for savings.
The law reduces the corporate tax rate to 21 percent beginning in 2018, and makes that rate permanent. Under the new law, pass-through entities, typically small businesses, will see a 23 percent deduction of qualifying pass-through income. The provision expires at the end of 2025 and treatment would return to existing policies.
The law also repeals the fine imposed on individuals who do not purchase health insurance, often referred to as the “individual mandate”— a stipulation that has caused some confusion in the small-business community, cautions Shawn McBurney, senior director of government relations for the Society of American Florists.
“It is important to stress that the requirement that an employer offer health insurance to their employees (the ‘employer mandate’) remains in effect and is being enforced,” he explained.
Other highlights of the new law:
Individual tax rates: Retains the current number of individual tax brackets at seven and reduces rates to: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 39 percent. All new rates expire at the end of 2025 when existing rates will be reestablished.
Corporate alternative minimum tax: Eliminated
Bonus depreciation: 100 percent expensing through 2022 then phased out through reductions by 20 percent per year through 2027.
Section 179 expensing: Increased to $1 million with a phase out beginning at $20 million.
For additional information, review this chart outlining the House and Senate versions of the bill as well as the final outcome.
Look for more in-depth coverage of the new law and how it could affect your business in the February issue of Floral Management magazine.
