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How the Tax Cuts and Jobs Act Affects Businesses

business taxes

The upcoming tax year brings in a lot of changes for self-employed and business taxpayers.

Taxpayers with sole proprietorship, partnerships, trusts, and S corporations will face some difficulties when they’re ready to file for the 2019 tax season because of the Tax Cuts and Jobs Act (TCJA).

Read below for the changes you need to know for your business taxes.

Here’s what qualifies as business income.

In order to have qualified business income (QBI), it must be domestic income from a trade or business. Your qualified business income (QBI) is calculated into a net amount and does not include employee wages, capital gain, interest and dividend income.

The maximum deduction increases.

Prior to the TCJA, you could deduct up to $500,000 for any section 179 property. It has now increased to $1 million. The phase-out threshold also increases from $2 million to $2.5 million. (Subject to change due to inflation.)

The new 20% deduction.

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Tax Cuts and Jobs Act and How the Tax Plan May Affect You

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New year, new taxes.

President Trump said that he wanted the new tax plan on his desk by Christmas. Nonetheless, the Tax Cuts and Jobs Act went through the Senate, House and flew by Congress. Ultimately, the Tax Cuts and Jobs Act tax plan has a goal to reduce the tax rates for individuals and businesses, which will ultimately affect how much you end up receiving your refund and paying in your tax liability. Most changes will expire in 2025 whereas some will remain permanent.

With the media raving about how taxpayers’ pockets will be affected, here are the changes that the new tax plan will lead to starting January 1st, 2019.

What was eliminated in the new tax plan?

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