December 26, 2018
This year has been one of confusion and uncertainty for taxpayers, with President Trump’s reform kicking in, leaving many filers unsure of how it will affect their tax liability. Experts are warning about significant delays to the filing procedures, as the IRS, tax filing software providers and tax professionals integrate the Tax Cuts and Jobs Act into their filing and processing systems.
So, how will your taxes fare after Trumps reform?
Tax reform for business owners:
Under Trumps reforms, some qualified business owners may see a federal tax reduction of up to 20%, but there are limits in place as to who exactly qualifies for this cut, as it does not apply across the board. The way in which the classifications are formed is complex, but essentially, qualifying single filers are permitted to have no more than $157,500; anyone having an amount over this limit will be subject to restrictions. Those for whom this restriction might apply are individuals such as doctors, accountants, lawyers and other similar professionals. These business owners lose their tax break if their income exceeds $201,500 as a single filer, or $415,000 if they’re married or filing jointly.
Confusion has abounded over just which types of professionals qualify for this tax benefit, and not only from individual tax payers, but from the IRS themselves as they attempt to iron out the details. If you’re a small business owner, don’t assume that you’ll qualify; seek advice and guidance from your tax advisor to try and get a definitive answer.
Who will almost certainly be disappointed with Trumps tax reforms?
Those living in states where taxes are high, and who are used to deducting state and local taxes on their returns, will doubtless be cursing Trump as tax reform limits deductions for personal taxes commonly referred to as ‘SALT’ taxes, to a total of $10,000.
Large families who will lose their tax benefit with this loss of personal exemptions, could make up those losses with the expansion of child tax credits of $2,000 for each child and new rules regarding the use of 529 education savings plans.
For those not living in regions presidentially declared as disaster areas, the inability to deduct casualty and theft losses might be balanced out by the increase in the standard deduction to $12,000 for single filers, and $24,000 if married or filing jointly.
Tax experts are predicting that most tax filers will be satisfied and pleasantly surprised by Trumps reform, and mainly because tax rates have been lowered. With little time left before December 31st, getting the lowdown on your 2018 tax bill should be a priority - especially for small business owners – so reach out to a tax professional asap, to determine what you can do to reduce your tax liability before the deadline.