01.16.18
The Tax Reform Bill President Trump recently signed reflects the most significant tax changes for the United States in over 30 years. By contemporizing the tax codes, Washington’s goal was to promote economic growth, expand business investment, increase job opportunities as well as increase our country’s competitiveness.
Corporate Tax Rates
The average global corporate tax rate is 25%, and to enable America to be competitive worldwide, the Bill has permanently reduced the US corporate tax rate from 35% to 21%. This should enable the US corporations to keep more profits and increase job opportunities.
The Pass-Through Deduction
If your label company is an “S” corporation, limited liability corporation, partnership or sole-proprietorship (also known as “Pass-Through Business”), tax payers will be able to deduct 20% of their income for the first $315,000 before ordinary income tax rate is applied. However, if your company is a professional service company, a phase out limit of $157,000 for individual taxpayer or $315,000 for pass-through company’s owners who file jointly. This tax provision expires December 31, 2025.
Section 179 and the Depreciation Bonus is a 2-step process. When using these two incentives, the Section 179 incentives would be deducted first and then the Depreciation Bonus.
Section 179
Effective January 1, 2018, this deduction went from $500,000 to $1,000,00 on accumulative purchases of up to $2,500,000. Purchases over the $2.5 million spending cap will reduce the $1,000,000 deduction dollar for dollar.
Qualifying Equipment (Partial List):
Depreciation Bonus
The Bonus Depreciation enables a company to immediately deduct 100% of a new and used asset. This is effective as of September 27, 2017 through 2022 with a gradual phase-out as follows:
Extensions and Amended Returns
Initially you were not allowed to claim Section 179 for previous tax years – however, under Rev. Proc. 2008-54, you are now able to amend and elect Section 179 if you previously did not for tax years beginning after 2007 through the current year. You may claim Section 179 deductions up to the due date (including extensions) for filing your taxes for the tax year you are claiming the deduction.
This Bill has numerous changes to the old tax incentives, many of which are not listed in this article. Please check with your CPA to see how these can apply to your company.
Linda Reed is Vice President of Business Development for Engs Commercial Finance Company, one of the largest independent commercial finance companies in the US. Engs has been recognized as one of Chicago's most dynamic and industry leading businesses as part of the Chicago Tribune’s and Better Business Bureau’s Top Workplaces for 2017. Engs works with label and printing industry associations, including FLAG and the FTA.
Corporate Tax Rates
The average global corporate tax rate is 25%, and to enable America to be competitive worldwide, the Bill has permanently reduced the US corporate tax rate from 35% to 21%. This should enable the US corporations to keep more profits and increase job opportunities.
The Pass-Through Deduction
If your label company is an “S” corporation, limited liability corporation, partnership or sole-proprietorship (also known as “Pass-Through Business”), tax payers will be able to deduct 20% of their income for the first $315,000 before ordinary income tax rate is applied. However, if your company is a professional service company, a phase out limit of $157,000 for individual taxpayer or $315,000 for pass-through company’s owners who file jointly. This tax provision expires December 31, 2025.
Section 179 and the Depreciation Bonus is a 2-step process. When using these two incentives, the Section 179 incentives would be deducted first and then the Depreciation Bonus.
Section 179
Effective January 1, 2018, this deduction went from $500,000 to $1,000,00 on accumulative purchases of up to $2,500,000. Purchases over the $2.5 million spending cap will reduce the $1,000,000 deduction dollar for dollar.
Qualifying Equipment (Partial List):
- New or used equipment
- Property attached to your building that is not a structural component of the building (i.e., matrix removal equipment, presses, humidity control machinery, etc.)
- Software
- Computers
- Business vehicles weighing in excess of 6,000 pounds
- Office furniture
- Office equipment
Depreciation Bonus
The Bonus Depreciation enables a company to immediately deduct 100% of a new and used asset. This is effective as of September 27, 2017 through 2022 with a gradual phase-out as follows:
- 80% in 2023
- 60% in 2024
- 40% in 2025
- 20% in 2026
Extensions and Amended Returns
Initially you were not allowed to claim Section 179 for previous tax years – however, under Rev. Proc. 2008-54, you are now able to amend and elect Section 179 if you previously did not for tax years beginning after 2007 through the current year. You may claim Section 179 deductions up to the due date (including extensions) for filing your taxes for the tax year you are claiming the deduction.
This Bill has numerous changes to the old tax incentives, many of which are not listed in this article. Please check with your CPA to see how these can apply to your company.
Linda Reed is Vice President of Business Development for Engs Commercial Finance Company, one of the largest independent commercial finance companies in the US. Engs has been recognized as one of Chicago's most dynamic and industry leading businesses as part of the Chicago Tribune’s and Better Business Bureau’s Top Workplaces for 2017. Engs works with label and printing industry associations, including FLAG and the FTA.
