As a business owner, you find yourself battling with various issues in the business including human resource management, clients management, finances, and more.
But perhaps one of the most critical parts of any business has to do with taxes. And trust me on this one, you don’t want to be on the wrong side of the state regardless of the reason. Of course, other areas of your business are equally critical, but taxes have been known to bring down empires that had been built over decades. Don’t believe me, check out this article by Journal-NEWS.
In this post, I will share with you some of the recently introduced tax amendments that specifically affect businesses in the US. In the end, you should be able to apply both the old and new tax laws in accordance with what’s provided for in the Act.
With that, below are three main tax changes affecting businesses in the US today.
1. Reduced Corporation tax rates
Up until the introduction of the 2017 Tax Cuts and Jobs Act, the corporation tax rate varied between 15% to 35%. However, this has since been amended – all qualifying businesses will now pay the corporation tax at a rate of 21%.
But despite the rate being set at that, businesses operating in the US are still faced with additional taxes levied by the respective states consequently bringing the tax rate to an average of 25.7%. Be sure to check the exact applicable rate in your state.
2. Change in Business Meals and Entertainment Deduction
If you are a business person or a freelancer who tends to get work done over a meal or a drink, then this is for you. Initially, the amount spent on meals and entertainment when doing business used to qualify for a 50% deduction; however, the new tax laws have eliminated that benefit and the whole amount cannot be deducted.
Nonetheless, if such expenses relate to parties and holiday packages for employees, then it can be treated as an allowable deduction. Also, meals and drinks purchased during bonafide business trips qualify for a deduction.
3. Expansion of the Bonus Depreciation
If you’re looking to invest in business equipment, you’ll be happy to know that the whole cost can be deducted through to 2022. This means that you can spread the amount yearly until 2022; after that, the deductible amount will be reduced to 20% of the cost of qualified equipment until 2026.
However, even as you look to expense 100% cost of your equipment between now and 2022, Sec 179 limits the full deductible amount to a maximum of $2.5 million.
In 2019 and beyond, the IRS will continue to issue new rulings and interpretations of all the recently introduced tax laws. Ensure that you stay on the look regarding any publications by the various tax bodies as well as other knowledgeable platforms.
As usual, we will always keep you updated on any new changes affecting small and medium businesses, so be sure to stay tuned. You are also welcomed to reach us with any inquiries regarding the tax laws.