Here’s how the new tax plan impacts your business…
Below are few major highlights for Corporations/ Businesses.
- Reduction in corporate tax rate: Under the new tax plan, corporate income is taxed at a top rate of 21% instead of 35%.
- Alternate Minimum tax: The bill repeals AMT for corporations.
- Multinational corporation taxes: Currently, US operates on a worldwide system of taxation i.e companies have to pay a top rate of 35% on income earned abroad or internationally. Under the new tax plan, multinational corporations will be taxed based on territorial system i.e they are taxed when they bring money home. They are allowed to defer income on foreign profits until they are ‘repatriated’ or brought into the United States. Profits held overseas can now be repatriated at a rate of 15.5% for cash assets, 8% for non-cash assets.
- Taxes on pass-through entities: S Corporations, LLCs or partnership who pay their share of taxes through individual taxes can exclude 20% of their pass-through income from taxes.
- Business Interest deduction: This is capped at 30% of taxable income (excluding depreciation).
- Net operating losses: Limits to 80% of the taxable income.
- Section 179 Depreciable assets: For 2017 business expensing was limited to $500,000 in a year. With the new rule, you can expense up to $ 1M. ( Section 179 tax allows businesses to deduct the cost of equipment or software purchased during the year. This means you can deduct the entire cost of your gross income).
Note: This bill does not impact your 2017 taxes