3 Overlooked 2018 Tax Reform Changes

If you’ve been paying attention to the news, you know that a massive tax reform bill was just passed last year. However, as a small business owner, what do these changes mean for you? Will you be saving money or will it make the tax process even more complicated? We’re working with GovDocFiling to find out the most notable adjustments that will affect your business.

20% Business Income Deduction

If you are running a C-corporation, you know that your tax rate dropped from 35% to 21%. However, as a small business owner, chances are that you’ve either submitted an LLC tax form or you’re running an S-corp instead.

Because these entities are pass-through businesses that means that the tax rate won’t affect you because the company doesn’t pay taxes for itself. However, the bill now allows you to claim up to 20% of your earnings as business income, rather than your standard tax rate. Individuals making less than $157,500 or couples making less than $315,000 will qualify for this deduction, which can allow you to keep a lot more of your earnings.

Standard Deduction Doubles

When filing your taxes, you can either itemize your deductions or use the Standard Deduction set forth by Congress. This new bill doubled that amount from roughly $6,000 to $12,000 for individuals and up to $24,000 for couples. This means that you probably won’t have to itemize, assuming that your deductions are less than that. Overall, filing taxes will be a lot easier because of this change.

100% Bonus Depreciation

As a business owner, you have property that you use for your daily operations, such as a computer or a car. Before this tax bill, you could claim up to 50% of the depreciation on such property in the first year you owned it. Now, you can claim 100% of it. This change will last until 2023 when the percentage starts to go back down.

Overall, the tax reform bill was helpful to small businesses, and filing will be much easier and more simplified. Still, be sure to talk to your tax professional about any other adjustments that may affect you.