Five 2018 Year-End Tax Planning Opportunities for Businesses

By Attorney Jason S. PalmisanoNovember 16, 2018Business

As the year concludes, the focus for many business owners turns to tax planning given the numerous changes in the tax law under the Tax Cuts and Jobs Act of 2017 (TCJA). Here are five year-end tax planning considerations for business owners:

1. The allowable deduction for businesses under Internal Revenue Code Section 179 for the full purchase price of qualifying equipment and/or software purchased during 2018 increased from $500,000 to $1 million. The allowable deduction now begins to phase out, dollar for dollar, once total asset purchases reach $2.5 million. And, qualified asset purchases (which now includes purchased new or used property) made after September 27, 2017 may qualify for 100 percent bonus depreciation. These increases could prove valuable to businesses seeking to expand.

2. Consider converting to a C corporation. The TCJA permanently decreased the top C corp tax rate from 35 percent to 21 percent. However, keep in mind the effect of double taxation applicable to C corps, which occurs when C corp owners are taxed on the dividend income received from the entity – income that’s already been taxed at the C corp level.

3. Review tax-attribute carryovers, such as net operating losses, capital losses, tax credits, and charitable contributions to determine if any are expiring and to what extent they can be used in 2018. The net operating loss (NOL) deduction for NOLs arising in 2018 is now limited to 80 percent of taxable income. Under previous law, NOLs could be carried back two years and forward 20 but TCJA eliminates NOL carrybacks and allows unused NOLs to be carried forward indefinitely.

4. Pass-through entity owners such as partnerships, S-Corps or sole proprietorships may be entitled to a maximum 20% deduction of domestic “qualified business income.” The deduction reduces taxable income, not adjusted gross income, and eligible taxpayers are entitled to the deduction whether or not they itemize. S-Corp shareholders should determine their eligibility for the 20% qualified business income deduction and then review year-end compensation to distribute business profits, as well as meet 2018 estimated tax requirements through final income tax withholdings.

5. Cash basis taxpayers may accelerate deductions by prepaying certain expenses before year-end. Also, credit card charges incurred before year-end may be deducted in 2018 and paid in 2019.

There are over 130 new tax provisions in the TCJA. Business owners are faced with the opportunity and challenge of maximizing their tax benefits under the new law. PLDO attorneys are well versed in tax law, wealth management and asset protection, and other business planning strategies. For assistance, please contact Attorney Jason S. Palmisano at 561-362-2034 or email jpalmisano@pldolaw.com.

 

 

Disclaimer: This blog post is for informational purposes only. This blog is not legal advice and you should not use or rely on it as such. By reading this blog or our website, no attorney-client relationship is created. We do not provide legal advice to anyone except clients of the firm who have formally engaged us in writing to do so. This blog post may be considered attorney advertising in certain jurisdictions. The jurisdictions in which we practice license lawyers in the general practice of law, but do not license or certify any lawyer as an expert or specialist in any field of practice.

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AuthorJason S. Palmisano

Jason S. Palmisano is a Senior Counsel with Pannone Lopes Devereaux & O’Gara LLC and a member of the Estate and Trust Planning, Administration and Litigation Team. He focuses his practice on counseling clients in all areas of trust and estate planning and administration, Elder Law and guardianship law, Medicaid planning, disability planning and probate administration.

Attorney Palmisano has significant experience advising clients on wealth management, asset protection, charitable giving strategies and in all matters of tax planning, including multinational tax and advising clients on business and succession planning. In addition, his practice includes preparing a wide variety of trusts, including grantor, irrevocable life insurance, special needs and qualified personal residence trusts, among others.

Prior to his legal practice, he was a Campus Director for Athletes in Action, where he provided leadership training and led charitable giving campaigns.

Attorney Palmisano earned his J.D. from Samford University, Cumberland School of Law, cum laude, his LL.M in Taxation from the University of Florida Levin College of Law and a B.S. in Math Education from the Miami University in Ohio.  He is licensed to practice in Florida and is a Florida Bar board certified lawyer in wills, trusts and estates law, which is a highly regarded designation that recognizes member-attorneys for their high standard of professionalism, ethics and special knowledge, skills and proficiency in practice areas.

To contact Attorney Palmisano, call at 561-362-2034 or email jpalmisano@pldolaw.com.

 

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