Tax Cuts and Jobs Act - Considerations for your business and personal finances
Taxes, ughh! Yes, taxes are not exactly anyone’s first topic of choice, but they impact us all. So better to know how they impact you and be proactive than to put your head in the sand and hope for the best.
Although the Tax Cuts and Jobs Act (TCJA) bill, which was signed into law in December of 2017, is a whopping 429 pages (has anyone actually read this?!) we wanted to focus on two sections that affect business owners on both a business and personal level.
The following article and E-Book will cover the following points:
- Business entity considerations for business owners
- Personal financial planning considerations for business owners
Business Structure
What form of business entity should you choose?
Until recently, the decision to operate using a C Corporation entity structure was heavily outweighed by “double taxation”, if single taxation wasn’t enough! Even though taxation is not the only reason for entity choice, it did cause several businesses to consider and/or choose a pass-through entity (PTE) structure. In December 2017, the government passed the Tax Cuts and Jobs Act (TCJA), which made significant changes to the tax rates. These changes have given business owners a reason to re-evaluate their choice of entity.
We will cover the following points in more depth in the E-Book:
- Expected use of after-tax cash
- Qualified Business Income Deduction (Section 199A)
- Foreign and state taxation
- Profitability and growth of the business
- Expected rate of return
- Owners' objectives including an exit strategy
The TCJA reduced the corporate income tax rate from a graduated rate topping out at 35% to a flat 21%...yes…a 14% reduction! The individual rate dropped from a top rate of 39.6% to 37%. This 2.6% rate change seems like a drop in the bucket compared to the corporate rate change.
Download the full E-Book below to see an example of how to factor these rates into your decision to change or remain in your current entity type. The decision is a multi-step process that involves making assumptions/predictions over several years extending to sale of the business.
Personal Financial Planning for Business Owners
Sorry, another topic that can tend to get a little dry, but hey let’s see if we can make this a bit more interesting!
The Tax Cuts and Jobs Act also made a variety of individual changes for people on a personal level. Ya ya, I know, this is getting even drier! But you need to know this stuff as it impacts your financial situation, and let’s face it, you use the money to do all the fun and exciting things you and your family like to do, so doesn’t it make sense to know the changes?
The individual changes included:
- Retirement Plan limit increases for 2019
- Personal Exemption Deduction Eliminated, Standard Deduction Amount increased
- Depreciation and Expensing limits increased
- 529 Plans now allowed for K-12 tuition
- Estate and Gift Tax Limits increased
We think this E-Book will give you some nuggets to consider while you read this over your Sunday morning coffee because of course this is exactly what you were looking for on a Sunday morning. ?
We appreciate your taking the time to download and read through our Tax Cuts and Jobs Act E-Book and hope that you learned some things that will positively impact your business and personal finances. As always make sure to consult with your tax, legal, and financial professionals when considering making any changes to your business or personal situation.
Please pass this E-Book along to friends and colleagues, who knows you could even recommend it for your next book club choice!
Thanks again.
Derek Notman & Bart Halderson
