There has been a lot of talk about the new tax law that was recently passed. Gold Standard Tax wants to help you understand the impact this could have on your business. 

ONE: 20% Deductions for Pass-Through Businesses

Pass-through businesses include S-corporations, partnerships, sole proprietorships, and LLCs under those entities. If your business is considered as one of these entities, you are affected by the new law in regards to your deduction. It used to be that pass-through rates were lower than corporate tax rates. But this new law allows for 20% deduction to give incentive to work for ourselves instead of an employer. While this will not affect the amount of self-employment tax you owe, this 20% deduction reduces taxable profits. There is a required investment formula to follow, and most “knowledge” workers are exempt from this benefit. However, if the total income is less than $157,500 when filing separately or $315,000 when filing jointly, there is an exception to those rules.

TWO: Business Meals/Entertainment Deductions Gone

Now for some bitter news… this tax law eliminated deducting meals and entertainment for business purposes. So even if you are the one footing the bill and the meal was for sole business purposes, the bill can no longer be deducted on your return. Deductions are still allowed for meals, travel expenses, and drinks for business travel. Click here for more information regarding what can be deducted while traveling for charity or for business. 

THREE: Expansion of Depreciation/Expensing

If you are looking to purchase new equipment for your business, you can immediately deduct 100% of business assets through 2022. After that year, bonus depreciation will start to phase down at 20% increments until it is reduced to 20% in 2026. Equipment now includes personal property used in hotel business and types of real property.  

As we move through this tax season, you can count on us to keep you updated on the effects of the new law and for providing any further education necessary.

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