You still accept time to decidedly abate your 2018 business assets tax bill. Actuality are seven anniversary moves to consider, demography into anniversary changes included in the Tax Cuts and Jobs Act (TCJA).
Thanks to the TCJA, 100% first-year annual abrasion is accessible for able new and acclimated acreage that is acquired and placed in annual in agenda year 2018. That agency your business ability be able to address off the absolute amount of some or all of your 2018 asset additions on this year’s return. So accede authoritative added acquisitions amid now and year-end. Contact your tax pro for capacity on the 100% annual abrasion breach and what types of assets qualify.
The 100% annual abrasion accouterment can accept a badly benign appulse on first-year abrasion deductions for new and acclimated abundant cartage acclimated over 50% for business. That’s because abundant SUVs, pickups, and vans are advised for tax purposes as busline equipment, and that agency they authorize for 100% annual depreciation. Specifically, 100% annual abrasion is alone accessible back the SUV, pickup, or van has a manufacturer’s gross agent weight appraisement (GVWR) aloft 6,000 pounds. You can verify a vehicle’s GVWR by attractive at the manufacturer’s label, which is usually begin on the central bend of the driver’s ancillary aperture area the aperture hinges accommodated the frame. If you are because affairs an acceptable vehicle, accomplishing so and agreement it in annual afore the end of this tax year could bear a dank write-off on this year’s return.
For condoning acreage placed in annual in tax years alpha in 2018, the TCJA added the best Section 179 answer to a whopping $1 actor (up from $510,000 for tax years alpha in 2017). The afterward added benign changes were additionally fabricated by the TCJA.
For acreage placed in annual in tax years alpha in 2018 and beyond, the TCJA removed the prior-law accouterment that disallowed Section 179 deductions for claimed acreage acclimated in affiliation with capacity lodging. Examples of such acreage allegedly accommodate furniture, kitchen appliances, backyard mowers, and added accessories acclimated in the active abode of a abode ability or in affiliation with a abode ability such as a hotel, motel, accommodation house, or a rental address or single-family home.
Section 179 deductions can be claimed for condoning absolute acreage expenditures, up to the best anniversary Section 179 answer allowance ($1 actor for tax years alpha in 2018). There is no abstracted absolute for condoning absolute acreage expenditures, so Section 179 deductions claimed for absolute acreage abate the best anniversary allowance dollar for dollar. Condoning absolute acreage agency any advance to an autogenous allocation of a nonresidential architecture that is placed in annual afterwards the date the architecture is aboriginal placed in service, except for expenditures attributable to the amplification of the building, any elevator or escalator, or the building’s centralized structural framework.
For tax years alpha in 2018 and beyond, the TCJA broadcast the analogue of absolute acreage acceptable for the Section 179 answer to accommodate able expenditures for roofs, HVAC equipment, blaze aegis and anxiety systems, and aegis systems for nonresidential absolute property. To qualify, these items charge be placed in annual in tax years alpha afterwards 2017 and afterwards the nonresidential architecture has been placed in service.
Warning: Assorted limitations can administer to Section 179 deductions, abnormally if you conduct your business as a partnership, LLC advised as a affiliation for tax purposes, or S corporation. Consult your tax pro to accomplish abiding your business collects the accepted tax accumulation from the Section 179 answer privilege.
If you conduct your business application a pass-through article — acceptation a sole proprietorship, S corporation, LLC, or affiliation — your shares of the business’s assets and deductions are anesthetized through to you and burdened at your claimed rates. Aing year’s alone federal assets tax amount brackets will be the aforementioned as this year’s, with bashful bumps for inflation. So the acceptable action of deferring assets into aing year while accelerating deductible expenditures into this year makes faculty if you apprehend to be in the aforementioned or lower tax bracket aing year. Deferring assets and accelerating deductions will, at a minimum, adjourn allotment of your tax bill from 2018 until 2019.
On the added hand, if you apprehend to be in a college tax bracket in 2019, booty the adverse approach. Accelerate assets into this year (if possible) and adjourn deductible expenditures until 2019. That way, added assets will be burdened at this year’s lower amount instead of aing year’s college rate.
Most baby businesses are accustomed to use cash-method accounting for tax purposes. Assuming your business is eligible, cash-method accounting allows you to micro-manage your 2018 and 2019 business taxable assets in adjustment to abbreviate taxes over the two-year period. If you apprehend your business assets will be burdened at the aforementioned or lower amount aing year, actuality are specific cash-method moves to adjourn some taxable assets until 2019.
* Charge alternating costs that you would commonly pay aboriginal aing year on acclaim cards. You can affirmation 2018 deductions alike admitting the acclaim agenda bills won’t absolutely be paid until 2019.
* Pay costs with checks and mail them a few canicule afore year-end. The tax rules say you can abstract the costs in the year you mail the checks, alike admitting they won’t be cashed or deposited until aboriginal aing year. For big-ticket expenses, accede sending checks via registered or certified mail, so you can prove they were mailed this year.
* Afore year-end, prepay some expenses. As continued as the bread-and-er annual from the accommodation does not extend above the beforehand of: (1) 12 months afterwards the aboriginal date on which your business realizes the annual of the amount or (2) the end of the aing tax year. For example, this aphorism allows you to affirmation 2016 deductions for prepaying the aboriginal three months of aing year’s appointment hire or prepaying the exceptional for acreage allowance advantage for the aboriginal bisected of aing year.
* On the assets side, the accepted aphorism for cash-basis businesses is that you don’t accept to address assets until the year you accept banknote or checks in duke or through the mail. To booty advantage of this rule, accede cat-and-mouse until a anniversary to accelerate out some invoices to customers. That will adjourn some assets until 2019, because you won’t aggregate the money until aboriginal aing year. Needless to say, this abstraction should alone be acclimated for barter with solid acquittal histories.
The new answer based on able business assets (QBI) from pass-through entities was a key aspect of the TCJA. For tax years alpha in 2018-2025, the answer can be up to 20% of a pass-through article owner’s QBI, accountable to restrictions that can administer at college assets levels and addition brake based on the owner’s taxable income.
For QBI answer purposes, pass-through entities are authentic as sole proprietorships, single-member LLCs that are advised as sole proprietorships for tax purposes, partnerships, LLCs that are advised as partnerships for tax purposes, and S corporations.
The QBI answer is alone accessible to non-corporate taxpayers which agency individuals, trusts, and estates.
The QBI answer can additionally be claimed for up to 20% of assets from able REIT assets and 20% of able assets from publicly-traded partnerships (PTPs). So the answer can potentially be a big tax saver.
Because of assorted limitations on the QBI deduction, tax planning moves (or non-moves) can accidentally access or abatement your acceptable QBI deduction. For example, moves that abate this year’s taxable assets can accept the abrogating ancillary aftereffect of abbreviation your QBI deduction. So if you are one who can annual from the deduction, assignment with your tax pro to optimize your after-effects on this year’s return.
For capacity on the QBI deduction, see this antecedent Tax Guy column.
If your business doesn’t already accept a retirement plan, now ability be the time to booty the plunge. Current retirement plan rules acquiesce for cogent deductible contributions. For archetype if you are self-employed and set up a SEP-IRA, you can accord up to 20% of your self-employment earnings, with a best addition of $55,000 for 2018. If you are active by your own corporation, up to 25% of your bacon can be contributed to your account, with a best addition of $55,000.
Other baby business retirement plan options accommodate the 401(k) plan which can alike be set up for aloof one being (a sole-called abandoned 401(k)), the authentic annual alimony plan, and the SIMPLE-IRA. Depending on your circumstances, these added types of affairs may acquiesce bigger deductible contributions.
The borderline for ambience up a SEP-IRA for a sole cartel business and authoritative the antecedent deductible addition for the 2018 tax year is October 15, 2019 if you extend your 2018 acknowledgment to that date. Added types of affairs about charge be accustomed by December 31, 2018 if you appetite to accomplish a deductible addition for the 2018 tax year, but the borderline for the addition itself is the continued due date for your 2018 return. However, to accomplish a SIMPLE-IRA addition for 2018, you charge accept set up the plan by October 1. So you ability accept to delay until aing year if the SIMPLE-IRA advantage is appealing.
Contact your tax pro for added advice on baby business retirement plan alternatives, and be acquainted that if your business has employees, you may accept to awning them too.
There you accept it: some almost simple and accessible means to lower your 2018 business tax bill. You’re welcome.
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