Headlines at the end of 2017 heralded passage of the Tax Cuts and Jobs Act. Many of the provisions of that law carry implications as we close out 2018. As a New York business owner, are you up to speed on the implications of the reforms for your situation?
While the tax changes promise cuts of about $1.5 trillion, most experts agree the tax filing processes remain as complicated as ever. That suggests that the time is ripe to year-end review, in consultation with an experienced tax law attorney, to determine what steps might deliver the greatest tax benefits now and in the year ahead.
Things to consider
One of the most significant changes in the new law is the 20 percent deduction now allowed for qualified income from pass-through business entities. Because the maximum benefit possible can be difficult to calculate, many observers recommend working with an adviser you can trust. Instruments from the estate planning toolbox might also provide some means of improving your tax position, so tapping advisers with experience in this practice area is wise.
The advantage of good timing
In the business context, experts offer that myriad actions are worth exploring to achieve an edge on taxes. These might include:
- Increasing year-end spend: By pre-paying insurance premiums, mortgage payments or other debt obligations, it might be possible to reduce your business tax liability. Other areas, such as payroll taxes, gifting and credit card use can affect taxes, too. And don’t overlook the potential tax advantages of increasing your contributions to your retirement accounts.
- Capital investment: In addition to reduced tax rates on corporations, the law now increases allowed depreciation rates for business equipment purchases, including vehicles used for business.
On credit card use, proper timing may allow making a business purchase that’s deductible in 2018, but is paid off in 2019. And if you are among the increasing number of people earning income as an independent contractor, date awareness could make a big difference.
Timing things well can be tricky and have unintended consequences if done badly, so planning care is required.