In this fifth article in a series of eight, I’m talking about the key business tax law changes that are made under the newly passed tax reform, the Tax Cut and Jobs Act. If you missed my first four articles in this series, I encourage you to go check them out, especially if you’re interested in learning about the effects of the new tax law on your individual income taxes.
Most taxpayers, if not all, are going to be effected one way or another by this new sweeping tax reform and Corporations seem to be some of the biggest beneficiaries of this Act. Prior to the new law, corporate tax rates in the US were nearly the highest in the world with graduating tax brackets spanning from 15% to 35%. Beginning with the 2018 tax year, this rate drops to a flat 21% and this applies to C Corporations, but not Sub Chapter S corporations. I’ll cover the effects of the new tax law on Sub Chapter S Corporations in my next article.
Code section 179 is a section of the tax code that allows taxpayers, subject to limitations, to deduct the cost of qualifying property rather than depreciating it over time. Previously there was a limit of $500,000 for this deduction for property acquisition of $2 million or less during the tax year. If you spent more than $2 million dollars, your $500,000 deduction began to phase out. Under the new law, these amounts are increased to a deduction of $1 million and the phase-out threshold amount is increased to $2.5 million in acquisition costs beginning in the 2018 tax year.
Code Section 179 has also been expanded to include certain improvements made to nonresidential real property such as roofs, HVAC and fire protections systems as well as alarm and security systems. Prior to the new law, you were required to depreciate these costs over a period of years.
If you plan to purchase a new passenger vehicle in 2018, the luxury auto depreciation limits have been increased from a $3,160 first year deduction to $10,000 and the additional $8,000 first year bonus depreciation for eligible vehicles still remains in place.
If this information has been helpful and you want to learn more, visit my website at actservices-inc.com.
