Tax Reform Changes to Businesses

This article will cover The Tax Cuts and Jobs Act changes to businesses from 2018-2025.

We have already covered the following areas of the tax reform changes to Businesses, see links bellow for more information.
  • New 20% qualified business income deduction for owners of flow-through entities.
  • Changes to Bonus and sec. 179 asset depreciation.
  • Changes to like-kind exchanges tax deferral.
Other Tax Reform Changes for Businesses.
Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Under the previous law corporate tax rates just like those of individuals and passthrough entities was based on the total income levels of the corporation and calculated on an increasing scale. This was replaced with a flat 21% tax rate for any income level.
The 20% AMT was repealed
  • AMT credit is refundable and can offset regular tax liability at 50%
Expansion of the availability of simplified methods, such as the cash method and exemption from inventory and long-term contract methods, for taxpayers with gross receipts of less than $25 million
New 80% limit on net operating loss deductions for losses generated in tax years beginning after December 31, 2017
  • Under the previous law NOL deductions could have been used to amend last 2 years and used within 20 years going forward. Usually referred to as back 2, forward 20 rules.
  • The new law eliminates the ability to amend 2 years back, but does no longer have a limit of 20 years so the NOLs can be carried forward indefinitely up to 80% of that year’s income.
  • NOL limitations for pre-2018 losses.
    • Rules for existing NOLs remain the same. These losses can be carried back two years and forward 20 years. There is no taxable income limit to usage of pre-2018 losses.
New dis-allowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (with exemption for businesses with annual gross receipts of $25 million or less over 3 years)
Elimination of the Section 199 deduction (domestic production deduction) for tax years beginning after December 31, 2017, for all taxpayers.
New limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation for amounts paid or incurred after December 31, 2017
  • Deductions for entrainment expenses are disallowed.
  • Current 50% limit on deductibility of business meals is expanded to include:
    • Meals provided through an in-house cafeteria or on the premises of employer.
    • It is very important to split your M&E expenses into 100%, 50% and Non-deductible Entertainment.
New tax credit for employer-paid family and medical leave—applies to 2018 and 2019 only.
  • Businesses can claim a general business credit of 15.5% of wages paid.
    • If payment rate is 50 of wages normally paid
    • Credit is increased by 0.25% points (limited to 25%) for each percentage point the payment rate exceeds 50%

For more information See:

Meal & Entertainment Changes Under Tax Reform

Business Expenses vs. Assets | Is there a difference according to the IRS? and Tax Reform changes.

Section-199A Qualified Business Income Deduction

TAX REFORM ON 1031 | CRYPTOCURRENCY AND REAL ESTATE INVESTORS


The materials posted in this article are for informational purposes only and should not be regarded as accounting or tax advice provided by YR Tax Compliance LLC. These materials have been prepared by professionals, however they should not replace professional services, and the user should seek advice before acting on any information presented. Every situation is uniquely different, and could make a world of difference on implementation of specific regulations.  YR TAX Compliance LLC assumes no obligation to provide notification of changes of tax laws, regulations or other factors that could affect the information posted.